As Mall and Shopping Center REITs Crumble, New Investment Opportunities Emerge
August 22, 2017
Long considered a prime option for investment, brick-and-mortar retail locations and the Real Estate Investment Trusts (REITs) that finance them have been losing ground for a number of years.
There are a number of factors that have led to this decline, but chief among them is the rise of e-commerce. As more online retailers appear, providing a wide range of products available from the convenience of one's home, it has been harder and harder for brick-and-mortar staples to turn a profit. In short, the age of Amazon Prime may have killed the retail star, so to speak.
As a result, historically sound real estates investment opportunities like malls and shopping centers are seeing smaller returns and greater risks than before. While that isn't in and of itself a bad thing, one of the main draws for REITs is their low risk, high rewards nature. So what will fill this void?
One strong option are single use developments, particularly student housing. While traditionally a mixed use development has been a hot commodity, the decline in retail as a whole has made it difficult in all but densely populated urban centers. Even there, the risks of mixed use developments are on the rise.
Student housing investment opportunities are particularly well suited for investors looking for low risk, high reward investments. That is because, unlike most real estate investments, student housing is largely recession proof.
During the Great Recession, for instance, enrollment in post-secondary education grew 4.7% in 2008 and 6.3% in 2009. That means there were more students looking for housing despite the broad economic collapse. Year after year, more and more students are applying to college.
But don't be confused. Even with the market now limping towards recovering, student enrollment is expected to continue to keep increasing. There are a number of reasons for why this might be the case, including stagnant wage growth and more competition for better-paying jobs, even with the unemployment rate at its lowest point in 16 years.
Another great option for investors is to work with a real estate acquisition company to find turn key properties. Turn key describes a property that is not only renovated, but is currently occupied. That means that you are able to see positive cash flow on day one of the investment.
While turn key opportunities can be more expensive at the outset, they cost very little to upgrade and maintain. Additionally, you have the benefit of knowing that there is a viable market for your investment, considering there are already tenants paying for the space.
The constant news about the decline in REITs that focus on shopping centers and malls can be distressing. It is important to know that there are still options available to you that are low risk and high reward, including student housing and turn key properties.