Why Retail Real Estate Is A Great Investment in 2023 and Beyond

As a real estate investor, being able to identify trends in the market is necessary if you want to make sound investments that pay off over an extended period of time. If you’re adding commercial real estate deals to your portfolio, there are several types that you can invest in which include office properties, multifamily rentals, and retail real estate. In 2023 and beyond, retail real estate looks to be a great investment – here’s why.

Retail Real Estate is Hedge Against Inflation

The cost of building new structures is increasing with each passing day, which means that there are less structures available for a relatively affordable price. At the moment, less availability of commercial buildings means that property values and rental prices will increase. When you lease out a retail building, you can factor annual rent increases into the contract, which allows you to hedge against any increases in inflation.

Retail Format Can Make Big Difference

How successful retail spaces are depends on the format they’re in. For instance, strip malls in large towns and cities provide consumers with convenient and accessible locations to get all of their shopping done. These retail locations are usually financially solvent. In comparison, traditional indoor malls have been finding it difficult to adapt to the competition from online retailers.

As an investor, you’d benefit from using asset repositioning when investing in a shopping mall, which means that malls could be transformed into other types of retail stores. Keep in mind that retail real estate is looking to be in a better position than office buildings.

The COVID-19 pandemic made work-from-home a much more viable alternative, which has resulted in a sizable drop in the number of office buildings that need to be constructed. It may be a few more years before demand of workplace infrastructure is better understood. In the meantime, there are no signs that the retail real estate sector will slow down any time soon.

Retail Boosted by Sustainable Practices

When you want to invest in retail real estate, the best investments are ones that involve green real estate. Buildings that are constructed with sustainability in mind are able to maintain high air quality and improve consumer health. They can also lower carbon emissions by a considerable amount. Additionally, states like California are also requiring new residential and commercial buildings to be designed with green practices at the forefront, which is why investing in sustainable retail real estate will likely position you well for the future.

Continued Supply Chain Improvements

At the moment, commercial investors are hesitant in making retail real estate investments because of continued supply chain issues. Even though these problems improved throughout 2022, they create substantial issues with the transportation of goods all over the world. In 2023, most economists believe that improvements will be made to the supply chain, meaning that it’s a good time to invest in retail real estate.

Additional Benefits of Retail Real Estate Investments

Retail real estate will be a great investment in 2023 and beyond because of all of the benefits that inherently come with these investments. These investments can diversify your portfolio by a considerable amount.

A single investment can be supported by different streams of income from numerous tenants. Even when a tenant needs to leave the space, your portfolio shouldn’t be hurt substantially. You can use this type of real estate to diversify across industries. Tenants in other retail sectors may fare better.

Retail real estate also offers notable passive income opportunities for your portfolio. When you buy a retail property via a crowdfunding platform, all of your investment is passive, which allows you to avoid managing tenants and any issues that arise.

Before you invest in a retail store or shopping center, take time to visit it and determine if the location it’s in will be able to support the retail center on a long-term basis. Check if there’s high foot traffic and if the stores are all well-maintained.

As with any type of investment, retail real estate will likely experience ups and downs over the next few years. However, all current trends indicate that this and other forms of real estate should continue to perform well for the foreseeable future.