Apartments vs Shopping centers

[Tom C]

I know a lot will say it depends on personal preference, but for a buy and hold strategy, what do you prefer and why?

[Victor Alfonso]

This question can go a million directions depending personal circumstances and knowledge, but assuming location and quality of the properties are equal, and you have knowledge in both arenas(very important, stick to what you know) I would go with multifamily for the long term.

The retail landscape is changing drastically and a greater amount of retailers are becoming extinct. Many of the pros of retail real estate are disappearing: businesses want smaller spaces, shorter leases and have more options due to the oversupply of retail space. Not to mention that sales kickout clauses in leases are becoming standard practice(unless you're dealing with first-time business owners who have never leased retail space, another risk altogether). Landlords are having to find different and unique uses to lease their space, and a lot of the time these retailers can't pay significant rents. Triplet net sounds sexy, but when you're trying to drive occupancy a lot of the times you end up with a modified gross deal because the rents you charge might not even cover your extras (CAM, Tax, etc.)The fact is with retail, sales drive your rents. Although there will always be a place for brick and mortar stores, it is no secret that a higher percentage of retail sales are coming via the internet, and this trend is increasing. Unless you're investing in a large lifestyle center or mall, you won't have the community aspect and your success is going to be directly tied to the sales of your retailers, nothing else.

I personally will be investing in retail, but not for long term. I see a lot of opportunity in mismanaged centers that are lacking in operations expertise, but I wouldn't invest utilizing the buy&hold strategy.

Just my 2 cents.

Victor