I personally believe that retail has not bottomed out. There is some more to go. Therefore, waiting until second half of 2019 may be the best choice.
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When is a better time to invest in the U.S. retail market?
We have successfully invested in retail in Asia for more than 10 years. We understand that the U.S. retail market has struggled of late, especially properties that have big-box tenants. We believe that there might be an opportunity once the market has stabilized. Do you believe that the market has bottomed out or is it still on a downward trajectory? Would it be a smart idea to enter the market in 2019 or wait a little longer?
Answers
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I would take a wait-and-see attitude. Big box stores continue to struggle and that means more property will be on the market. By waiting, I mean not investing now but looking at it on a quarter-to-quarter and region-by-region basis.
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There are many good short-term and long-term opportunities.
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The decline in the retail market and industry seem to be continuing, so I don’t think, in general, it has bottomed. While there are some bright spots, such as well-located, grocery-anchored neighborhood retail in areas with a good economy and strong demographics that are not oversupplied with retail, in general the trend of store closings and retail failures will likely continue for a few more years until things bottom out. The country is so oversupplied with retail, especially malls, that it will be a while until we work through this structural shift in the retail industry.
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It depends on whom you ask. Many investors are buying retail properties for the first time today. They are looking at alternate uses and approaches. I believe that anyone looking at retail needs to work with a professional who is well-versed in the industry. Parts of the market are clearly suffering, as shown by CMBS delinquencies and problems with Sears and JC Penney. I don't believe anyone should generalize about the market. I would avoid the mid-sized malls and look for opportunities where properties can be re-purposed. Remember that certain chains are still flourishing and one size doesn't fit all.
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