Why Invest in Retail Properties
- January 4, 2021
Is investing in retail properties a losing proposition? After all, aren’t virtual stores and shops shuttering brick-and-mortar businesses? In a word: no. America’s love of ecommerce aside, the retail sector has historically delivered solid returns, and continues to do so at a rate that outpaces all other commercial property types.
Consumer spending is the engine that drives the US economy. Investing in retail properties can represent exceptional opportunities to grow your wealth and portfolio.
3 Reasons to Invest in Retail Space
As mentioned, consumer spending is huge; it makes up nearly 70% of the total US economy in terms of GDP. The retail sector is strong, and many ideal anchor tenant organizations have even increased their physical presences (e.g., Home Depot, Lowe’s, etc.). Benefits of investing in retail properties include:
- Long-Term Leases. There are several ways to structure retail leases. For example, a triple net lease is one in which the tenant is responsible for paying the real estate taxes, as well as insurance and common area maintenance. You may also assess a percentage rent, which is based on sales volume. Regardless, though, tenants are likely to sign up for long-term leases. Why? A new store may typically need extensive improvements and customization. If they are already in a space that meets their needs, they are far more inclined to stay put. This builds a level of income security into your investment.
- Diversification. This is important; let’s say that you invest in a shopping center with multiple tenants. This gives you multiple income streams. If one tenant does go under, your impact is minimal. In other words, you are not dependent upon the performance of one tenant.
- Profitability. Ultimately, this is one of the most compelling reasons to invest in retail space. Retail real estate commands the highest price per square foot of any commercial asset class.
These are just a few of the myriad of reasons to invest in retail space. To learn more, contact Belmont Associates.