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Retail sector undergoing changes

8/14/2016 | Real Estate Blog

Commercial real estate investors in Pennsylvania may be interested in some trends around retail real estate that are bucking typical expectations. Usually, restaurants can reliably act as anchors in shopping areas that are on the decline. They bring in more foot traffic and spending. However, for several quarters now, foot traffic and sales in the restaurant industry have been weaker.

Although spending in restaurants went up more than 6 percent in the first quarter of 2016, this was still not as high as the 8 percent increase in one 2015 quarter. A number of factors have been blamed for this sluggishness. Health care costs and rent have gone up. Restaurants in turn are unable to increase their profits under increasing demands that they raise employee wages. Furthermore, they cannot significantly raise their prices when consumers are getting good food prices at the grocery store.

Another development is the decline of class-A malls. These are malls that have more than $450 per square foot in sales, and it is unusual for economic conditions to lead to serious declines in this area. However, this sector had 7 percent growth in the third quarter of 2015, and that became negative in the first quarter of 2016. Class-B malls fared better and remained at 7 percent growth.

Whether people are investing in commercial real estate for the first time or is an experienced investor, they might want to work with an attorney. Many issues may arise in the course of purchasing, managing and selling commercial real estate. From contract disputes to liens to loans to dealing with zoning laws, an attorney may be able to guide either an experienced or novice investor through the process.