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Ecommerce starting to push rent down for retail space

On Behalf of | May 3, 2018 | Commercial Real Estate

Online shopping has put convenience and huge selections at the fingertips of people in Missouri. Nationwide, competitive pressure from online retailers has forced many retail companies to go under, like the recent closures of Toys “R” Us stores. With increasing amounts of retail space on the market, rents have started to drop in some locations. Meanwhile, costs are rising for online retailers, which could create competitive opportunities for brick-and-mortar retailers.

Lower rents could allow retail companies to build a viable presence within communities. Lower costs for brick-and-mortar retail could enable those businesses to overcome the price advantages that have driven consumers toward online shopping. Rising advertising rates at Facebook and Google are cutting into the profit margins for online sellers. During the first six months of 2017, the cost of ads on Facebook reportedly doubled.

Higher shipping rates compound the problem of rising advertising costs for customer acquisition. UPS is updating its pricing structure to reflect the new demands on its delivery business caused by surges in online shopping. Shipping costs could be behind Amazon’s announcement that the company will raise Prime membership fees by 20 percent.

A person about to make an investment in commercial real estate will need to consider these market forces as well as many other details. The representation of an attorney familiar with commercial development may aid someone with due diligence, financing and the final terms of a purchase agreement. An attorney might investigate relevant issues like the title, tax liens, zoning or environmental regulations. Any of these factors could influence the long-term costs and success of the development. Legal advice may help someone make informed decisions when negotiating a commercial real estate transaction.