How “The Great Retail Apocalypse of 2017” Will Impact Landlords

How “The Great Retail Apocalypse of 2017” Will Impact Landlords

2 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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How will the current trouble in retail affect rental property investors? What smart moves can real estate investors make now?

The media headlines have been full of stories about how the US.. retail industry and property market is in trouble. CNN Money says, “There is a retail bubble—and it’s bursting.” The Atlantic calls it “The Great Retail Apocalypse of 2017.” America has 10x more mall space per person than countries like Germany. Consumer behavior is shifting more and more to shopping online and to spending more on experiences than material items; much of that store space simply isn’t profitable. Thousands of stores are being closed by big retailers like HHGregg, JC Penney, Macy’s, Sears, Abercrombie & Fitch, Guess, and more. How will it impact landlords?

Related: Will Massive Retail Job Cuts & New Tech Trends Transform the Rental Market?

The Impact on Jobs

One notable impact is the replacing of thousands of jobs. These types of store workers are one of the biggest groups of workers in the country. Most should be able to find other work nearby. Others will need to retrain and learn new technology so that they can work for themselves or invest in real estate to avoid losing their homes.

landlord-lessons

Desirability

The shuttering of malls and strip centers can make an area appear less desirable. When you pull into a neighborhood and the local strip mall is covered with boards and completely vacant, that’s typically not a good sign. It makes it less appealing for future renters and home buyers. The opposite is also true.

Conversions

Fortunately, retail property owners and developers have a couple of new trends to capitalize on. The first is experiential events. On Black Friday last year, many people went to the mall, not to buy, but to simply hang out. Once you are there, you typically end up spending something. So, investing in events and experiences can keep up mall traffic and support retail tenants. Mixed use developments are becoming more popular, too. Some of these old malls could be converted from straight retail to shopping and residential. With people living there, the mall would naturally be more trafficked.

Related: A Perfect Economic Storm Has Homeowners Staying Put & Would-Be Buyers Sidelined

Shopping for Rentals

One of the main takeaways from these trends is the shift in how consumers are shopping for everything. That applies to buying rental property and finding homes to rent as well. Savvy real estate investors will get out ahead of this curve. They will embrace finding deals online. They will make sure they are advertising where and when renters are looking for their next home. That will include online and mobile marketing, SEO, Google ads, and showing up on new smart home device searches like Google Home, Amazon Echo, Alexa, and Apple’s HomePod.

cash-flow-rental

Summary

There is a lot of disruption ahead for all but the most innovative retailers and retail investors. Most investors will be wise to safely camp out in residential real estate in areas with stronger commercial centers nearby. Whatever you do, know your trends and run your numbers conservatively.

What do you think will be the fallout from the retail world disruption?

Let me know with a comment!