Early this month, an 87-year-old New York City retail landlord told me that,“Buying into the Dollar is just investing into a belief system.” Making the case for why he’s still buying retail properties, he added, “With retail, I am buying into New York’s population, compounded by appreciation.” Contrary to ageist stereotypes, he is well versed in Omni-Channel retailing, and keenly tuned into the importance of brick & mortar stores in this new age of retail.
With Retail, I am buying into New York’s population, compounded by appreciation.
87 Year Old NYC Retail Investor
Some people think that once interest rates return to normal, there will be a ferocious appetite for retail. And there are good reasons for this belief: There is still pent-up/post-covid demand, and retail sales are up year over year 8.2% (notably out pacing ECom sales at 6.2% yoy). Furthermore, there simply haven’t been new retail properties built in the City—in 2022, developers completed the second smallest amount of retail square footage in multiple decades, with the annual total falling below the 1-Million sf mark for the third year in a row. Yet others believe that right now is the new normal: Interest rates are only going up, and if they do go down significantly, then the abundant supply of available retail properties will tip the scales toward a buyers’ market. In this view, disruption is the only consistency.
I do not have a crystal ball, and have never pretended to have one, but I don’t need one to see that right now is an excellent time to buy retail properties. Whether it’s the right time to sell, on the other hand, depends on the owner and the building. I am currently near to completing a transaction where my client is benefitting from interest rates being right where they are. She’s selling a troubled retail property and doing a 1031 Exchange into a NNN leased property in Florida, where her cash flow will be greater, with a much more solid tenancy.
Please send me a note if you would like to understand the above a little more.