Home » Real Estate

Strike Three - The Coming Retail Real Estate Bubble

Jan 29, 2008
We are all living through the Residential Real Estate Meltdown

*** that's Strike One ***


Speculation and criminally easy credit built the Bubble and now we watch its sloooow motion bursting in the real estate sales and price numbers daily.

As if that wasn't bad enough, the Lenders and Wall Street firms created a Smoke and Mirrors Ponzi Scheme out of what used to pass as responsible Lending Practices and you get

*** Strike Two ***

- the nastiest Credit Crunch in a very long time.


Here are a couple symptoms:

Tuesday CitiGroup announced a loss of $9.8 Billion and a bail out by money from Kuwait and Singapore.

They reported revenue of $7.2 billion for the quarter, down 70 percent from $23.8 billion a year earlier. That is a $16 BILLION dollar drop for the quarter alone ... and no one expects this to be the end. No wonder no one wants to lend anyone new money ... they aren't sure how much they really have!

Ready or not here comes *** Strike Three ***

The Bursting of the Retail Bubble


Strikes One and Two are tipping us into a Recession AND there has been significant overbuilding of Retail Space in many markets as developers chased the Residential Bubble.

We are set up for a real crash in Retail Properties.

This week bought three signs of the impending collapse:

1) Massive Retail Overbuilding:
In the average market Retail Space Under Construction accounts for just 3.3% of the existing stock of Retail Property.

Here are the percentages of Retail under construction in several cities as reported in the WSJ this week.

San Antonio - 11.6%
Inland Empire, CA - 8.7%
Phoenix - 7.2%
Cleveland - 6.5%
Las Vegas - 6.3%

2) Big Boys go Belly Up

Centro Properties is an Australian company and owns 674 Shopping Centers in the US. This week they announced that the entire company is for sale.

They financed a recent acquisition spree with $3.4 Billion in short term debt and are now unable to refinance as a result of the Credit Crunch.

3) Recession's Effect on Retail

Retail Profitability is uniquely tied to the health of the overall economy and Consumer Spending. It also tracks the Residential Markets most closely of all Commercial Property Types.

With the triple play of

- Overbuilding
- Residential Collapse
- Recession

A Collapse of Profitability in Retail is just over the horizon.

I would say "Watch Out" if you are in any stages of purchase or development of Retail Property.

Strike three is coming at you ... Don't swing at that pitch.

Now we all know that "All Real Estate is Local" ... and you may be in a local market where you will do just fine ... AND I advise you to carefully check the state of the larger market where you reside for signs of future weakness.

These same Market Forces do not bode well for Office Properties....

Which brings us to Multifamily...

All of these same factors play to the advantage of Multifamily Investments.

- A pool of new renters as foreclosures skyrocket
- A need for affordable housing as the economy sinks
- A shrunken pool of apartments available due to condo conversions over the last few years
- Many areas experiencing very low Apartment Construction starts
- strong rental growth projections

These forces are moving so strongly in favor of Multifamily that I am almost exclusively focused on this Asset Type for the foreseeable future.

A quick Credit Crunch "Man on the Streets" report.

Starting right now, you will want to adjust your acquisition proformas to get no more than 75% LTV in debt financing on your purchased properties in 2008. You might be able to get up to 80% ... just don't "bank" on it going in. AND build financing contingencies in to your contracts to give you at least 30 days longer to close than you are used to taking in the past.

The old rules of financing Commercial Property Acquisitions have changed. You will have to kick and scratch to finance any purchase in the next six months ... get ready.
About the Author
Learn the Insider Secrets of Commercial Property Investment from Monte Lee-Wen who has personally purchased over $150M in Commercial Real Estate. CLICK THIS LINK NOW to start your Commercial Real Estate Investing Education with his 14 page FREE Report "35 Reasons You Should Invest in Commercial Real Estate". http://www.investortours.com
Rating:
Please Rate:
(Average: Not rated)
Views: 141
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Accounting
    • Credit
    • Currency Trading
    • Debt Consolidation
    • Insurance
    • Investing
    • Leasing
    • Loans
    • Mortgage
    • Mutual Funds
    • Personal Finance
    • Stock Market
    • Structured Settlements
    • Taxes
    • Wealth Building
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources