When it comes to shopping malls, real estate investors have three main choices. They can buy commercial real estate (by purchasing individual retail units), they can buy shares in publicly traded shopping mall companies or they can buy into privately-held shopping malls.
No matter which one you choose, there are going to be pros and cons to each investment and you’ll need to do your research to determine which option makes the most sense for you.
The biggest malls are all around the world
From Mall of America to Shinsegae Centum City, malls are thriving. In fact, about 60% of North American shoppers visit a mall every week. With figures like that, it’s easy to see why investors might be interested in shopping mall investments.
It also explains why some experts predict that by 2022, we’ll have more retail space than we will people. But with so many malls already up and running across North America, why do we need even more?
What people like about malls
A new study from NPD found that millennials love shopping malls and many of them shop at them regularly.
Millennials recognize how critical physical retail space can be to their overall shopping experience, Matthew McCauley, chief commercial officer at NPD Group, wrote on Retail Wire. Mall traffic remains relatively high for a generation not always known for spending money.
Main reasons for investing in shopping malls
Increased footfall, longer open hours, growing population and rising per capita income. At a time when retail spending growth is declining and disposable incomes are squeezed, malls offer shoppers respite from both financial woes and sticky heat.
In addition to offering much-needed relief for consumers, shopping malls are also ideal investment opportunities for private equity funds looking to invest cash surpluses accumulated during years of successful investing activities.
Buying a shop in a mall
In recent years, many of America’s largest shopping malls have fallen into financial straits as sales have slowed, partially because Americans are now shopping online for a growing number of products. But some analysts believe retail real estate still holds great promise—if you know where to invest.
They say getting a piece of a thriving mall could make you rich in just five years. If that sounds like something you’d be interested in, you might want to consider shopping mall investment opportunities.
Pros & Cons of buying your own shop
The Pros and Cons of buying your own shop are as follows:
- You’ll have more control over your business. When you’re a tenant, there are rules and regulations that you must follow. As an owner, however, you can make decisions about everything from design to hours of operation based on what you believe will be most profitable for your business. In addition, being an owner allows you to determine whether or not to rent out space and when—or if—to sell or buy other businesses.
- You’ll own property instead of renting it. If real estate investments appeal to you, buying a shop outright may prove better than leasing it because with ownership comes ownership rights that aren’t necessarily available when leasing or subleasing retail space at a shopping mall.
