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Where is retail heading?
This is a question we’ve gotten a lot lately from our listeners and investors. With the rise of online shopping through Ecommerce options like Amazon, we’ve been seeing some rapid tightening in retail development across the board. With big-box retail winding down and shopping center investments getting tight, many investors and developers are wondering what comes next.
Our guest this week is an expert on spotting development trends and cycles. John McNellis is a developer, speaker and author. Founder and President of Mcnellis Partners development firm, John has been developing a variety of real estate for over 30 years. Although retail and multifamily have been his primary asset classes, John has development experience in several asset classes.
This episode, John joins us to discuss the development outlook for retail and offers advice for investors looking to make the transition to development.
Development Outlook
- Retail markets challenged throughout the U.S.
- Over-building of retail
- Influx of online shopping
- Retail going through downsizing cycle
- Industrial market seeing benefits from Ecommerce boom
Approaching Development
- Residential: best to start with land and build up
- Retail: finding a good tenant for anchor is best strategy
- Risk-management is key to long-term success
- Rule of thumb: look for investments that earn 2% above cap rate
- Don’t build on spec
Transitioning to Development
- Find an experienced partner when transitioning to large or mid-size multifamily developments
- For first-time developers, find a broker in your area that specializes in the asset class you want to develop
- Approach the public with a project before taking it to city officials
Investment/Development Advice
- Development follows job growth
- Urban Land Institute (ULI) is a great resource for developers
Resources
- Check out John’s book: Making it in Real Estate: Starting Out as a Developer
- Read John;s monthly real estate column in Registry Magazine
- Contact John directly at john@mcnellis.com or visit www.mcnellis.com