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Online shopping and its impact on commercial real estate

6/26/2016 | Real Estate Blog

Pennsylvania residents are probably aware of the importance of consumer spending to the U.S. economy. There are approximately 50,000 shopping malls spread across the country to cater to the needs of American consumers, but the advent of the information age has altered the way that the nation shops. Once dominant retail chains like Blockbuster Video, Borders Books and Sharper Image have already closed their doors, and many industry experts believe that more household names will fall victim to online shopping in the near future.

The 2008 financial crisis and subsequent recession were not kind to the commercial real estate market, but office vacancy rates have fallen in recent years as the economy began to show signs of recovery. However, retail vacancies across the country remain at about 16 percent. Most market analysts put this down to the increasing popularity of Internet shopping, and they point out that there are about 650,000 U.S.-based enterprises generating $1,000 or more each year in online sales.

Some analysts believe that concerns about the retail sector may be contributing to a sluggish commercial mortgage backed securities market that has failed to keep pace with the Green Street U.S. Commercial Property Index. These fears are being fueled by surplus capacity, and the increasing popularity of online shopping makes it seem likely that the problem will become even more pronounced in the years ahead.

The competition to attract tenants can be fierce when vacancy rates are high, and a growing number of those who rent space are demanding more flexible terms and shorter leases. Attorneys with real estate experience may seek ways to accommodate demanding tenants while protecting the interests of commercial real estate developers and owners. Attorneys may also take steps to ensure that agreements are not delayed by regulatory or permit issues.