Strip Malls: Develop new or buy existing?

Strip Malls: Develop new or buy existing?

Is it better to buy old run down strip centers instead of building? writes Candy from Texas, via Ask The Strip Mall Insider

As I told Candy in an email where we discussed the specifics, I’ve always been a believer in vertical construction. The financing has been easier, everything is new, and we know tenants generally prefer new buildings to old, unless there’s some character in the architecture. In California, we don’t see much of that!

Today the entire paradigm has changed due to the inability to finance most any non-residential real estate, and the growing supply of bank-owned properties.  Although we were somewhat prolific in the last decade with strip mall development, I doubt I’ll develop anything for the next 3-5 years. Simply, there’s just much inventory coming available, often at below replacement cost, to justify the additional expense of new construction.

As a result, rents will stay low for awhile. Until our supply finds some equilibrium with demand, I strongly recommend you stick with existing buildings as your end price will allow you to be much more competitive in rents than if you were to build new. I wish you the best, Candy, and thanks for writing The Strip Mall Insider.

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