With in-person shopping at a low in 2020, the industry has finally started seeing a comeback. In both 2021 and 2022, brick-and-mortar retail sales saw a huge jump, and many experts believe this will continue into 2023.
Though high interest rates, rising inflation, and labor shortages loom over many industries, increased construction costs and limited building space ensure that retail and other commercial building projects will remain stable in the coming year.
As our economy continues to recover and adjust, we’re looking at unique opportunities investors can take advantage of in the ever-changing commercial real estate market.
Keep reading to learn about our top commercial real estate opportunities that all CRE investors should consider in 2023 and beyond!
An Increase in Redevelopment Projects
Redevelopment projects are ideal investments due to their low carbon footprint, high ESG ratings, existing reputation with consumers, and low building costs.
Because new construction projects are continuing to get more expensive, we’ll see more retail developers and commercial real estate investors focus on redeveloping existing retail spaces. This will help attract new customers and shoppers but is also an excellent opportunity for investors.
Think about a new apartment in an old building — all of the amenities, appliances, and systems are brand new, but the building still has its existing charm. This — and the low cost of renovations compared to a new building project — makes many redevelopment projects so desirable.
As rent levels continue to increase and occupancy levels increase even more, there will be plenty of demand for redevelopment projects, especially in highly populated areas. Many redevelopment projects will see buildings converted for other uses, such as office buildings, apartments, and other industrial projects.
The Evolution of Grocery Stores
Grocery stores will continue to evolve for consumer needs.
The sale of food and beverages on digital platforms like Amazon Grocery, Doordash, and Uber Eats has continued to rise. Still, most of these orders are fulfilled at the grocery store using a delivery service or curbside pickup. To continue evolving with the times, grocery stores must transform to fit our multi-channel world.
This could include extending partnerships to more delivery services or developing their own delivery services to compete with the top food delivery companies. But no matter how much of the grocery shopping process becomes digital, there will always be a need for brick-and-mortar grocery stores due to the nature of the product.
However, as grocery stores become less reliant on employees (see our McDonald’s example below), operating costs will also lower — making them a less intensive CRE investment.
Quick Service Restaurants & Fast Food Chains
Similarly to grocery stores, quick-service restaurants and fast-food chains will also continue to see an evolution in their services which will significantly impact how investors view them.
While these restaurants won’t necessarily need to develop their own delivery services, we’ve already seen how chains like McDonald’s have introduced robots into their operations. These automated employees are leased at a lower monthly price than the average employee, leading to lower operating costs and making them more attractive to investors.
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