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High vacancy rates in retail blamed on online shopping

On Behalf of | Jun 9, 2016 | Commercial Real Estate |

Whether shopping for new appliances or clothing, many people in California look online before going to a physical retailer. The trend toward online shopping is a likely reason why retail vacancy rates are high. In fact, vacancy rates for retail stores in metropolitan areas are almost 3 percentage points higher than they were before the recession.

A lot of retail companies have had to adjust to the new shopping paradigm by closing physical locations. For example, Sharper Image stopped selling its high-tech gadgets at brick-and-mortar stores after filing for bankruptcy. Some retailers adapt to online competition by focusing on their online presence while other retailers that are unable to adapt end up going out of business.

Another commercial real estate sector that hasn’t recovered its pre-crisis vacancy levels is metropolitan-area office space. New technology may have something to do with the weakening demand for office space because fewer employees are needed to get jobs done. Some argue that over-building is also a factor that is contributing to the high vacancy rates in office space. While the vacancy rates for metropolitan-area retail stores and office space remain high, vacancy rates for metropolitan-area apartments are far lower than they were before the recession.

Commercial real estate investors may want to stay up-to-date on trends so that they can take advantage of them to earn profit. Understanding why prices are rising or falling in a particular commercial real estate sector may help an investor to determine when to buy or sell. A real estate attorney can often provide this type of commercial property insight.