Real Estate Investment Trusts
The stock market has been rising steadily for the past several years. Conversely, Real Estate Investment Trusts or REIT’s have taken a sinking turn. Why the downslide? Firstly, the very real fear of rising interest rates. Secondly, and most importantly, shopping malls and chain stores have taken a nosedive in response to online shopping.
However, opportunity can be found in the midst of decline. Online businesses are steadfastly picking up the slack of brick and mortars. Leading the charge is mega retailer Amazon. Additionally, Amazon’s recent aquisition of Whole Foods is sure to cement its status as the top dog of online sales.
Online Supply and Warehouse Demand
Consequently, as online businesses continue to flourish we are seeing a record demand for warehouse space. Retail giants need these vast spaces to meet their needs as fulfillment centers. According to a recent New York Times Article, the trend is set to continue. Jonathan Peterson from the investment bank Jeffries reports, “Amazon is having an outsize effect on warehouse developers. By the end of the year, Amazon will rent an estimated 114 million square feet of warehouse space, up from about nine million in 2009.”
An estimated 3 billion square feet of warehouse space will be purchased to fill the e-commerce market according to Prologis, an industrial REIT. That same market is predicted to grow 162% over the next five years.
The Future of Commercial Spaces
With commercial real estate space being abandoned and the residential sector suffering from a lack of inventory, we have a theory. Home Qualified predicts that vacant commercial spaces will be rezoned and reimagined as residential developments. Reimagining these spaces is as cost effective as it is beneficial for the community it serve. As investment expert David O’ Rell reports, “One solution to the abandoned building problem is to transform former office buildings, warehouses and stores into in-demand properties. Repurposing commercial real estate is a good idea for cities that have plenty of empty buildings and a high demand for housing. It can also be a cost-effective move for developers and others in the commercial real estate sector. It often costs less to repurpose an existing structure than to build a new one.”
Armed with this information, if you’re looking to invest in a trend on the verge, commercial REITs are worth looking into.
Contact Home Qualified today with any questions regarding this or any other type of investment.