It should come as no surprise that in light of COVID-19 related closures, e-commerce has become an ever more integral part of our daily lives. Retailers of household goods, groceries, essential items, as well as non-essential, have in trial by fire fashion been required to provide appropriate infrastructure to ensure said goods are made available for consumers nationwide. This not only requires robust technological platforms, but sophisticated distribution networks including delivery services and warehousing in near immediate fashion.
The industrial market will remain strong, as COVID-19 has taught us that e-commerce remains vital, especially in a pandemic.
We have all recently heard in the media about the looming Tariff war between the US and China, and how it will cause a massive recession and ultimately lead to the downfall of America. To say that the assessment made by the media outlets is an exaggeration, would be the understatement of the century.
The Short Hills and Summit areas are continuing to flourish for the retail office sectors and as far as I can tell, these locations have been great for the investors that own them. A big part of this is because of the accessibility of these locations to Manhattan. Since Manhattan is just far enough away from the hustle and bustle, but close enough to access at any given time many companies have satellite offices and locations around the Short Hills and Summit areas.
The online e-commerce shopping boom sure has put a dent in retail and commercial real estate space as a whole, but is the damage getting worse or can industrial real estate bounce back and remain solid? The next downturn in CRE will be catalyzed initially by a stagnant economy and low growth, followed by multiple years of mild-to-escalating recession, credit re-rating, and demand for higher risk premiums by capital providers. Income growth will slow or go negative in the medium term, cap-rate compression will cease, and finding new tenants will be very difficult. With this happening, we will also witness aging demographics and subtle changes of consumption baskets and lifestyle, that revolutionize the format of office and retail.
It seems these days, there are growing numbers of supply chain disruptors. From erratic thunderstorms to tornadoes, hurricanes and droughts; natural disasters still pose the greatest threat to retail disruption. As these uncontrollable events happen, we feel the effects throughout the economy which directly translates to retail.
A little over a decade ago, brick and mortar retail space was the hottest market, with investors and users alike scratching and clawing their way into bidding wars for the elusive corner locations or store fronts on major highways.