Should Investors Shy Away from Big-Box Retail Properties?

Posted on July 05, 2018

The spate of big-box retail bankruptcies and store closures, including Toys ‘R’ Us, has left a gaping hole in the country’s commercial real estate market. While some of these properties located in desirable locations will check all the boxes for a good investment, most are too risky for the average investor seeking a steady stream of passive rental income.

A big-box store can be as large as 100,000-square-feet or more – a size that few other retailers can fill. When these stores close, property owners will have a difficult time finding a replacement tenant that needs that much space. Under these circumstances, landlords may have no other choice than to invest additional dollars to break up and divide the property into several separate, more marketable units.

Conversely, when a retail store or restaurant with 5,000-square-feet or less closes, the property owner will have a long list of potential replacement tenants to market the space to, especially when the unit is located in or near a grocery-anchored shopping center. This expansive universe of potential replacements tenants will increase further when the store or restaurant is located in a high-traffic area and has neighboring tenants with strong sales and staying power.

Before investing in any retail or restaurant property, investors should meet with experienced real estate advisors to ensure they mitigate their risks and maximize opportunities for profits.

The team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.