New owners making regional mall investments

On Behalf of | Mar 11, 2016 | commercial real estate

Florida developers and commercial property owners seeking to expand may soon face competition from new international investors and private entities. In the wake of numerous real estate investment trusts becoming more discerning about their portfolio holdings, some are selling lower grade shopping malls to non-traditional owners. Observers say these market factors persist regardless of the fact that many such properties are in need of substantial improvements.

One firm anticipates that 2016 will see an increase in sales by REITs from the previous year. Of the malls acquired in the previous five years, private buyers accounted for approximately 40 percent of those transactions. Pension funds and other institutional investors took a role in another 21 percent. Analysts say these trends reflect the fact that e-commerce and other factors are forcing regional malls to reassess the way they operate.

The changes could impact the way retail properties are used, with some calling for malls to be reworked as lifestyle and destination centers. Multinational retailers have already entered the domestic market, and some have been noted for their introduction of lucrative new retail paradigms. As compared to the net operating income growth projected for higher quality malls, however, less attrractive venues aren’t expected to expand much in the short term, and some observers even believe they may lose profitability with time.

Developing commercial real estate can be complicated. Finances are a constant factor in the success of most projects, and maintaining profitability is vital to seeing a development through. Companies that are developing retail projects must stay up to date on market trends so that they can keep their investors happy. Many seek the advice of an attorney on how different types of ventures might support their goals.