How Does An Unstable Retail Property Market Impact Independent Retailers?
Economists expect that a recession is coming in 2023, an understandable cause for panic. Retail will be affected by upcoming changes in consumer behaviors, which will cause a domino effect that impacts other industries. One of these is the commercial real estate property sector.
5 Ways an Unstable Retail Property Market Impacts Retailers
If small retailers want to grow or stay afloat during the recession, they need to understand how the unstable commercial property market will affect their business now and in the near future.
Fewer Commercial Real Estate Developments
Unstable markets come with financial uncertainty, meaning fewer commercial real estate developers will run to complete new projects. If few commercial properties are being developed, there won’t be as many opportunities for independent retailers to set up shop or move stores.
However, if developers can withstand the storm, they’ll benefit after the recession. And with the help of commercial development software, like Northspyre, developers can achieve predictable outcomes on all projects, even in unstable environments. Visit their website to learn more.
Smaller Stores With Low Rent Aren’t Available
While an unstable market means more small businesses are able to afford a lease (if they already have capital), that doesn’t mean they’ll be able to find a low-cost store. Investors are always the first people to buy up a vacant building, and they may hold onto it for a while.
Any retailer that can wait out the recession will do the same: avoid selling until they can make a profit. Independent retailers either have to wait, purchase or lease a property out of their budget, or rub elbows with real estate agents. All in all, it makes for a difficult-to-navigate market.
Unable to Sell Property (at All or for a Profit)
COVID-19 devastated a lot of independent businesses, and many of them are on their last legs. If they were thinking of selling their property now (i.e., early 2023), they might not be able to find a buyer. When they do, they may not get a fair offer. This also makes it harder to break a lease.
An unstable market and a recession doesn’t always equate to financial difficulties, but that’s the reality for many business owners and workers. It’s possible that retailers won’t be able to recoup on their investments or may even go into debt because they can’t sell or break their leases.
Local Retailers Can’t Keep Up With Rent
An unstable retail property market is typically caused by a recession, but a recession rarely means retailers pay less rent on their commercial properties. It’s normal for customers to avoid retail shops during an economic downturn, which affects a retailer’s profit margins and ROI.
Independent retailers often sell their goods at a higher price than big box retailers, so it’s difficult for them to justify another hike. These two scenarios make it hard for small businesses to pay their rent, which could result in a foreclosure. At best, they need to take out loans to survive.
Empty Properties Devalue the Market Further
Although consumer behaviors are naturally and understandingly impacted by the recession, these behaviors only make the problem worse. When people stop buying properties, they’re putting less money into the economy. Less money in the economy leads to a recession.
All those empty properties also create a rebound psychological effect, which makes the situation seem worse than it actually is. That doesn’t mean you should buy a retail property in this market if you aren’t able to, but it does mean it won’t get better until money exchanges hands.