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E-commerce may be affecting commercial real estate prices

8/2/2016 | Real Estate Blog

Commercial real estate investors in Pennsylvania have probably noticed that prices are beginning to go sideways. After the recent real estate boom caused prices to increase to more than double what they were at in 2009, commercial real estate price increases started to slow down. Some of the factors that may be contributing to the leveling off of real estate prices are decreased job growth, increased supply from new construction and talks of higher interest rates.

Many analysts have also noted the significant impact that e-commerce is having on the commercial real estate market. As consumers change their shopping habits and favor online retailers over physical retail locations, shopping malls, department stores and street-level retail stores are experiencing declining sales. Some analysts predict that 800 department stores making up 20 percent of mall space will soon close.

E-commerce has taken a lot of customers away from brick-and-mortar retail stores that sell things like clothing, electronics and household goods. However, grocery stores and grocery-centered shopping centers have so far not been affected by online shopping trends. That may change, though, as analysts predict that online grocery sales from companies like Amazon will soon be in competition with brick-and-mortar grocery stores. To compete with the convenience of in-person grocery stores, Amazon is even offering same-day deliveries.

While brick-and-mortar retail buildings may be decreasing in value, rent prices for warehouse spaces that are needed by online retailers are going up all over the country. Commercial real estate investors who are thinking about investing in warehouse space might want to talk to an attorney about the properties they are interested in purchasing. An attorney may be able to advise an investor on purchase agreements and rental contracts later on.