Commercial real estate investors may be aware that the retail sector has been having problems since the recession and has still not fully recovered. However, the recession alone is not to blame. The rise of Internet shopping has also been a significant factor and has been at least partly responsible for the closure of such familiar retailers as Blockbuster and Borders Books, both of which had a significant California presence.
Commercial real estate vacancies in the retail sector peaked in 2010 when the vacancy rate was around 17.5 percent. There has been little recovery since then, and the vacancy rate stands at 16 percent. In contrast, when online retailers with sales of more than $1,000 annually are counted, the total number is 650,000. It is simply no longer necessary to visit a brick-and-mortar store in order to shop or even to have a physical object from the store such as a catalog.
Despite the presence of almost 50,000 shopping malls throughout the country, existing retailers are struggling to stay afloat. Advertising is increasingly moving online as well.
A weak sector is not the only problem that can befall a commercial real estate investor. Among the problems that a buyer of commercial property might encounter are contract disputes, zoning issues and disputes with tenants. Working with an attorney may be helpful during the purchasing process as well as later if other problems arise. For example, an investor might purchase a property and find that the seller failed to disclose an issue that affects the value of the property. Alternately, an investor might know about issues with the property and plan to improve it but might then run into a conflict with a contractor about cost, timing or quality.