Moody’s Forecasts 11% Drop in Retail Rents
[{"id": "fplw7y0", "text": "11 seems young to me. Who would start a lease on a brick and mortar store right now? Just sell it in online or work from home...why try to kill yourself? Unless it is storage, or a drive through I don't see an 11% \"dip\", I see America finding a completely new way to do business for the next 5 years that doesn't involve a point of service. I'd love to have my mind changed....", "replies": [{"id": "fpm48gd", "text": "5 years? Can you explain how you came up with that number? In my state, what retail that has been allowed to open is packed to 25% capacity. Retail will always exist and the hundreds of ways it will continue to be a POS for certain businesses, they will design leases and exercise options. For many people, buying online doesn\u2019t cut it. The personal interaction &amp; the experience of shopping is a desire.", "replies": [{"id": "fpm932l", "text": "People are going to be freaked out by this pandemic for years to come, if not forever. Like how 9/11 changed the way we look at travel, this will change the way we interact face to face. Bill Gates paper is call Pandemic 1 for a reason, there will be more of these. Of course some businesses will always need retail space, but I don't see people enjoying shopping malls for fun anymore. They won't roam around and impulse buy, they will be much more aware of who and how many people they encounter. Plus the younger generations care less and less about the shopping experience. They would rather have Facebook and Google predict what they want before they know they want it and make a tic-tok video, instead of walking around a shopping center. Those could just be viewed as dirty.", "replies": [{"id": "fpmael8", "text": "I\u2019m in that younger generation and I can tell you that is one of the more laughable generalizations I have ever heard. If you look at history, you\u2019ll see we\u2019ve had these before. And historically, it tends to not change very much. I personally hypothesize some tension for a year at the very most, six months at the least, and everything is back to normal for the most part. \n\nPeople are too far set in their ways to change and frankly, too lazy. Also, people are not that scared or paranoid. Especially my generation, who isn\u2019t taking this very seriously. \n\nYou say people don\u2019t roam around and impulse buy, but they are doing exactly that during the pandemic. There are articles talking about frontline workers are Costco and Walmart frustrated with customers coming in buying non-essentials and gazing isles. I\u2019m just further confirming this is what I believe. I understand what you think and I respect your opinion but let\u2019s be honest\u2014\u2014 any and ALL gesturing at the future is pure speculation.", "replies": [], "depth": 4}, {"id": "fpmcf1e", "text": "Eh. I don't agree. Retail will always exist in a brick-and-mortar capacity. I think what we're likely to see is some streamlining of prototypes - perhaps smaller stores with more of a business shift to the e-commerce side to spread the risk. It's really just an acceleration of the existing trend. The current climate is bleak, but it will get better. We will eventually have a vaccine and life will return to \"normal\" or some moderate deviation thereof. It's not all doom and gloom.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fpm7dqk", "text": "I\u2019m a retail landlord, so I live and breath this topic. You\u2019re right that e-commerce has completely changed the retail business, which has affected retail properties by increasing vacancies and depressing rents. But, there are a lot of tenants in the retail sector who are not affected by e-commerce (or, at least much less so).  For example, all the service users in retail properties (e.g. hair salons, nail salons, dry cleaners, etc.) plus restaurants, as well as specialty retailers that don\u2019t lens themselves to online sales. We\u2019ve dealt with the rise of e-commerce for a while and the affect it\u2019s had on the retail business.  However, what we\u2019re experiencing now, and how it\u2019s affected almost every tenant I have is truly unprecedented. I\u2019ve never seen anything like it in my 25 years in the retail property business, including the Great Recession of 2008.", "replies": [{"id": "fpm9f6p", "text": "Yeah, because like how 9-11 changed the way we view travel and war, this will change the way we interact face to face. It will still happen, but people will be much more aware of who and where they are interacting, to keep it to a minimum. The days of impulse shopping are over IMO.", "replies": [{"id": "fpmm0r0", "text": "I understand your point, but I can\u2019t see how travel ultimately changed after 9/11, other than the TSA.", "replies": [{"id": "fpmqimr", "text": "Tell that to a middle eastern person.", "replies": [{"id": "fpmqn2j", "text": "I get your point. I\u2019m married to a Middle Eastern person, and I travel with her and her family.  That\u2019s why I made the TSA comment.", "replies": [{"id": "fpmsgje", "text": "It did take the airline industry about three years to bounce back and match the number of people flying pre-9/11. And they did that with discounted airlines that popped up after the tragedy. But maybe this sub is right and this won\u2019t have any lasting effect at all. IDK.", "replies": [{"id": "fpmuk7d", "text": "I do believe there will be lasting effects. I believe +/-20% of my retail and service tenants will not survive this - mostly bc they\u2019ll run out of cash. I believe many of the others, out of necessity, will become more efficient in how they operate their business, which will affect unemployment in the retail sector. I believe capital markets (commercial lenders) will change how they lend, which will reduce small business starts. I don\u2019t know if it will last forever, but I believe retail and service customers/patrons will not feel safe returning to shopping and eating out in large crowds. I\u2019m particularly concerned about the movie theater business, which was under pressure before COVID-19 came along. I\u2019ve got more info if you\u2019re interested.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpmjmrd", "text": "I\u2019m thinking about starting my own pediatric dental practice.. lease negotiations including 5 months of free rent fell apart last week.. I was going to circle back in 45 days.. do these predictions apply to me?", "replies": [{"id": "fpmlw7e", "text": "No the predictions don\u2019t apply to you, IMO. I\u2019d lease to you in a second (assuming you have the credit). In my 25 years in CRE, I\u2019ve developed a few \u201cabsolutes\u201d (well mostly absolutes, because there aren\u2019t any true absolutes).  One of them is that in times of economic uncertainty, people will cut a lot of things, but they\u2019ll still spend money on their kids and their pets.  So, I like kid-centric and pet-centric tenants in my properties.  Until there\u2019s an online method of cleaning teeth and filing cavities, I think you\u2019re fine. Now is not the time, but in the near future, retail and service users will start to fail, vacancies will rise, and landlords like me will be more willing to make concessions to prospects like you.", "replies": [{"id": "fpmmjq5", "text": "Thx for the reply!", "replies": [], "depth": 3}], "depth": 2}, {"id": "fpnivht", "text": "I think they do apply to you and the longer you can wait to re-engage, the more leverage you will have with your LL. Medical will be the retail industry's saving grace.", "replies": [], "depth": 2}], "depth": 1}]