If you think the real estate market bust is over… that we have recovered, think again!

Yes I know and I feel it too.  2018 is a bright year for our economy.  Small businesses are growing, employees and entrepreneurs alike are happy.  Tax cuts, residential property values climbing, new healthcare options are opening up and basically if we can get past the Democrats vs Republican, the we vs them mentality, well we would be sitting pretty and life would be looking fine.

Here’s the problem and thus my take on where we are headed.  Have you noticed as you drive through town that there are a lot of vacant commercial properties.  And a variety of for rent, for lease, for sale signs on most every strip mall and commercial office building.  Well, I have.  And this has been the same for the past 7 years … and growing.

In my small town alone there is over 300,000 sq ft of commercial space available and virtually none of it has been rented for over 5 to 7 years.   When I moved to this beautiful small town in 2010, I made a point of it to meet with the town Mayor, the town Manager, the Chairman of the local Chamber of Commerce.  I asked them all the same questions.  How’s the town doing?  How’s the market?  Business growth?   I got nothing but smiles and cheerful… comments such as “Hey things are great and on the rebound.”  Well today we are in the midst of a massive battle in our town for a property tax hike on the voting block which is designed to save the town from bankruptcy.   The town has cut over 50% of its employees over the past 5 years.  It has trimmed every part of its budget the town council can possibly cut back on and yet we are still headed down a path of financial disaster.

We will survive.  The town will make it through it and property taxes will increase in order to save the day.   However the problems we face here are NOT just due to the 300,000 sq ft of empty space.   Part of the problem arrives every day at our front door.  The door bell rings and when you open it, there is a package on the front step with the name AMAZON written on it.  Not just that, but the fact that I am home “while working” is part of the equation as well.

So let’s add up all these factors and see what we have.

Over the past 10 years companies such as Amazon and other online stores have taken a huge bit out of the retail sales market.

Over the past 20 years the number of home businesses have grown and stay at home workers have increased to the point where more and more companies located in brick and mortar office buildings have trimmed their foot print by 10 to 30%.

And during the past 5 years the number of retail giants such as Sears, RadioShack, JC Pennys, Toys R Us and many more or closing their doors or down sizing.

Here is where I think we are headed.  Over the next decade we will have massive foreclosures of the old strip malls and shopping centers.  Anchor tenants will be pulling out leaving large shopping centers all but abandoned.  Small family owned retailers will find their business sales drying up as online sales continue to rise and the foot traffic they once counted on as part of the sales volume they needed to keep the doors open… well, the steps will be silent.

You may think that by the retail store down the street closing tomorrow will have no direct effect on you.  However as with my small town, the effect will be there one day down the road.  So my suggestion to this is for: retailers, business owners, shopping mall owners as well as other commercial building owners each and everyone of them, you need to start thinking outside the box.  Start looking at the options for your property.  This is what I did.  When my small town did not listen to my forecast back 5 years ago, I moved my business to a large “virtually empty” commercial building in Mesa Arizona after presenting my thoughts to the property owner and today we have turned that large commercial property around from a dying part of the problem to a thriving opportunity.  Take your head out of the sand and start working the problem from a different vantage point.

Just my take…. Wayne Warrington

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