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The Real Estate Philosopher


Retail, Retail, Retail

May 13, 2021

The last time I stuck my neck way out, it was to pound the table that we would have a Big V Recovery, a phrase I coined.  I was dead-on accurate that time, so this means I must be right this time, right?  I am just kidding, but I am sticking my neck out again right now and saying that this is the best time ever to purchase, invest in, and otherwise play in the retail space.  Let me get right into it:
 
First – there is that old saw about buying low and selling high.  It is low right now.
 
Second – as per several prior articles, much competition is scared off by the retail-pocolypse – but the downdraft, in my view, only really applies to Zombie Retail (i.e., JC Penney) and not to Power Niche Retail, which is enjoying the benefits of lower rents and available space in which to expand at reasonable rents.  Indeed, I am reading recently that retailers are controlling their destiny in places like NYC by buying retail condominiums.
 
Third – malls and shopping centers will benefit from a boom in consumer spending.  My wife and I went “malling” only last week.  We bought three pairs of really nice shoes when normally we would have bought one pair.  I only had to sell one-hundredth of a share of my Tesla stock to do it – that is a joke, by the way, as I missed the Tesla trade.
 
Fourth – malls and shopping centers will also benefit from higher percentage rents plus a stronger and healthier tenant base.
 
Fifth – malls, which are the poster child for the retail downdraft, only have a vacancy rate of 11%, which to me seems incredibly positive.  I looked at a historical chart, and it shows over the past twenty years, vacancy rates between about 5% to 11% (today) with an average of about 8%.  Take a step back and think for a moment…..after the worst pandemic in 100 years, the vacancy rate rose a mere 3% above average…..isn't that great news? 
 
Sixth, the media publish headlines like the following, "UBS: 80,000 Stores Doomed To Close As E-Commerce Spikes Further."
 
But even this particular article isn’t as gloomy as the headline.  I mean, if 80,000 stores close over 5 years and 80,001 stores open in 5 years, it is kinda different.  They don’t talk about that.  If the media keeps up with articles like this, they will scare away even more of your competition. 
 
You heard it here first:  the death of retail has been dramatically exaggerated.  This is the moment to buying into, lending on, and investing in retail.

Bruce Stachenfeld aka The Real Estate Philosopher™

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As the Chairman of Duval & Stachenfeld – a law firm in mid-town NYC known as The Pure Play in Real Estate Law – I am inviting you to join The Real Estate Philosopher™. This will consist of my thoughts and also thoughts of friends and colleagues.

It will not be published in any traditional media – it will go only to friends of our firm. The purpose here is very simple – to put forth thoughts in the real estate world that are different, provocative, and challenging of accepted wisdom. Hopefully, nothing said here will be mainstream thinking.

You may be wondering how I am qualified to write on these topics since I am “just” a lawyer. However, I have an unusual place in the real estate world. As the Chairman of The Pure Play in Real Estate Law (one of the largest real estate law practices in NYC), I interact with an incredible number of real estate players. This ranges from small real estate shops with nothing but a gleam in their eyes, to some of the largest real estate institutions in the world, and everything in between. This gives me a unique and global perspective and allows me to act as an amateur philosopher in the real estate world. This has always been my hobby and it is what I love doing.

Regards,

Bruce Stachenfeld
a.k.a The Real Estate Philosopher™

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