Many commonly debate whether brick and mortar is dead, especial in retail where online shopping has taken off in the past 20 years. According to Chaim Katzman, chairman of Gazit-Globe and owner of hundreds of U.S. shopping malls, the drop in gas prices is leading to increased spending in shopping centers. With an extra $200 in each American family’s pocket, shopping centers boasting strong demographics are thriving. The economy is in its recovery stages, and more buying at shopping centers will allow for commercial real estate to thrive on higher rents.
Although rents will most likely rise, tenants will still demand retail space. Katzman expressed that vacancies are being “gobbled up”, and that the U.S. has been over-retailed for as long as he can remember. Cap rates are also between 5% and 10% for retail properties, which suggests a healthy retail real estate market.