Will massive retailer job cuts and emerging technology change the rental property market and who landlords should be renting to?
American retailers are slashing jobs. Disruptive technology is likely to change the U.S. job market faster and more substantially than we’ve ever experienced before. How might that affect rental property investors?
U.S. Retailers Hit Hard
Some retailers seem to be getting it right. A few, like Amazon, are even broadening their physical store footprints. But overall, online shopping and the enhanced profitability of online companies is taking a huge bite out of American retail.
According to Bankrate.com, at least these 17 major retailers are closing stores in 2017:
- Payless Shoes
- JC Penney
- The Limited
- Abercrombie & Fitch
- Gander Mountain
- The Children’s Place
- Wet Seal
- Whole Foods
These cutbacks and others mean the closing of hundreds of retail stores and the slashing of thousands of jobs.
New Tech to Kill More Jobs
The above is just the tip of the iceberg, especially when you factor in new technology, which is eliminating jobs in thousands more physical retail shops, offices, warehouses, and industrial companies. Mark Cuban even says that many tech jobs are no longer safe due to the development of AI. Some estimates put the number of jobs to be made redundant over the next few years as high as 80 percent. That’s 80 percent fewer jobs available!
How Will These Trends Impact Rental Housing?
Landlords must stay alert to trends like these. Obviously, if there is a massive pull back in local jobs and services, tenants may have a hard time living up to their lease agreements. In some cases, it may just be a matter of them running a month behind as they secure new work. For others, it may be very difficult to find local jobs that match their qualifications.
Do not invest in a location where your only source of tenants is at a local grocery store, factory, or even a local mall. It’s always smart to underwrite your deals conservatively. So, do not buy a property that is barely cash flow positive and where there’s no room to increase rents. The moment rents drop, you’re in trouble.
The above means that some landlords may want to be a little more careful in who they target as renters. It is also worth tracking successful retailers and how they are hiring. Amazon is another great example, announcing it will hire thousands of work from home employees this year. For those landlords who want to stay safe, it is also important to remember that when the economy and job market get tough, the demand for affordable housing and destinations only grows. So, acquire rentals in the right areas and select tenants carefully, and you should be fine.
How do you think the shift in the U.S. retail sector, along with other tech trends, might change the rental landscape?
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