As cracks appear in the global condo market and capital reacts, more investors may be falling back in love with the benefits of retail property investment this quarter.
The latest trends in the condominium market and stock market may have ruined a lot of fantasies; however, the smartest money is still seeking the safety of real estate investments for their capital. Sometimes there’s nothing like a good holiday to refocus us on what’s important and remind us of the value of things right under our noses.
The US Condo Market in Crisis
It has become really hard to deny the negative impact of years of overbuilding, and poorly designed condos are not expected to come to a new head any time soon.
Major US markets like San Francisco, New York and Miami have piles of new projects. In some cases, developers are sitting on a thousand or more units they just can’t seem to sell. Over supply is running into years of inventory, and rents have substantially softened in some areas. Meanwhile, individual buyers are struggling to find mortgage loans substantial enough to purchase and developers are limited by their financiers on being able to reduce asking prices. Eventually this oversupply of condos will create the perfect storm for bulk builder close out deals and some investors are already waiting on the sideline for these deals, so that they can get these units at fire sale prices and flip them.
The Capital Ramifications
Behind all of these new condo buildings and those in the works are billions in loan and international capital. The failure of these builders to perform can have a real impact on these investors. Both in terms of their ability to lend new money and simply causing fear and putting some on the sidelines while they watch it play out. This may certainly include Canadian pension funds and firms who have been some of the biggest investors in US real estate over the past few years.
The environment we live, work and play in is changing a lot. We may no longer need endless office space to commute to, nor will we need to drive to the malls ourselves, thanks to our ever smarter and autonomous cars. Yet, physical retail will always hold a special place in our hearts and wallets as long as retailers and investors continue to rediscover ways to improve the retail shopping experience.
ReDev Properties has been one of Canada’s leading shopping plaza re-developers and investors for years. Find out why we remain so bullish on this space and how our expertise has helped others like you with their financial goals.