How does the retail sector compare to other sectors of CRE?
What are the big differences between retail, industrial, multi family and office?
[{"id": "ilj92f6", "text": "First thing to note is that each has varying degrees of quality and value, so let\u2019s just look at the Class A version of each.\n\nOffice - Battered recently due to Covid, but in decline since the 2000s, but Class A office is characterized by high build out costs, long lease terms, and rich brokers.  Lots of institutional capital, high liquidity, and challenging underwriting.  Spaces can stay vacant for long stretches, and with WFH some companies are struggling to justify these expensive leases and build outs.  \n\nIndustrial - Really hot property type, which will most likely continue to grow in demand.  Amazon fucked it up by not knowing how to property underwrite deals, but the damage is done.  Long lease terms, really high build out costs and brokers who can make a career on leasing one business park.  Lots of insititutional and non traditional investors, you need to focus on things like clear height, parking, and column distance.  Multi story industrial is going to continue to grow.\n\nMulti-family - Another hot property type that will continue to grow in demand as there just isn\u2019t enough supply, nor will there be anytime soon.  High end multi-family includes high ceilings, open layouts, and a ton of amenities.  Short leases, low cap rates, and increased demand are to be expected.  Lots of investors period, with value add being the name of the game.  Brokers can make a killing on both sides, and multi family of all sizes are hot right now.\n\nRetail - Overall battered, but Class A is still in demand.  High end retail will command high rent, and top retailers still want the best space.  Leases have changed in the past 2 years due to Covid, and you want to be a tenant rep broker who represents a brand so you can push conforming leases.  As an owner, high marketing costs, constant expense to maintain the center, and looking for ways to maximize every free space.  As retail tends to have lots of parking, large parking lots have become found money with opporunities to develop pad sites, solar roofs, and other ancillary revenue drivers.  Cap rates have increased for this property type, and will most likely continue to do so, but not as high as you would think.  \n\nIf you\u2019ve got something more specific in mind, let me know.", "replies": [{"id": "iljb01a", "text": "Great write up", "replies": [], "depth": 2}, {"id": "iljessq", "text": "Nice job here.  And thank you.", "replies": [], "depth": 2}, {"id": "illiyoe", "text": "I would like to comment on this as I work for a Landlord Rep company handling Class A retail throughout the state of Florida (predominately Publix anchored centers). Retail may not be as \"battered\" as some think. Fenix is right, Class A is the most in demand with Cap rates still sitting around 4 - 6. Retail investments have increased 40-50% in the last two quarter's as people are realizing the demand for brick and morter is staying strong even with the rise of online shopping. Our portfolio of over 4 million SF of class A retail held above a 90% occupancy ratio throughout covid (we gave struggling tenants short term rent relief). People are turning B class strip centers into A class strip centers with national and franchise tenant mix's. Like Fenix said, there are heavier costs associated in being a Landlord Rep compared to that of a Tenant Rep, but we pass through expenses to the tenants so capital improvements and maintenance don't cost us as much as people may think (amortize the larger expenses and pass them through in NNN Fee's). I find that tenant reps are generally less sophisticated than Landlord Rep's. There is a big group realtors (I call then resi-brokers) representing small shop tenants and they don't really know what they are talking about. \n\nAlthough retail demand may be pulling back compared to Multi-Family, most of your tenants will be of higher credit, more sophisticated, and easier to work with if you self manage. Commercial Real Estate is great!", "replies": [{"id": "illmb6p", "text": "Great context, and thanks for providing your insight.  I'm concentrated in retail at the moment, and I've seen Class A retail in high demand, and many retailers going strong.  One thing I've seen is that smaller independent (mom and pop) retailers have slowed down, especially what I call immigrant businesses, ie donut shops, nail salons, etc.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]