0:00 Robomart – The store that drives to you!
1:30 First half 2021 CRE Recap for Retail Transactions in the Inland Empire
3:34 Lowering your property tax with Paramount Property Tax Appeal
4:20 Who is the top-rated fast-food restaurant?
5:00 Big Box retailers are downsizing to small-format stores
6:25 How to get back up to $28,000 per employee on wages paid during COVID
Hello, Investors!
For all of my regular readers, welcome back! And if this is your first time reading my newsletter, welcome! My name is Mike Lin, and I’m a commercial real estate broker. I help owners of retail properties determine their real estate value and help sell them for top dollar. And I make YouTube videos, too, like the one above. You can visit my channel to check out all of my videos.
Robomart – The store that drives to you!
Robomart is a self-driving convenience store in a van, which brings the store to your home. You hail it using your cell phone app, and the van comes to your location within 10 minutes.
For the initial launch, there will be two types of Robomarts. The pharmacy one, which stocks shampoo, hand sanitizer, and over-the-counter medicine, was recently piloted in West Hollywood.
Another one supplies snacks like chips, candy, and soda. More Robomarts are in the works, which will carry items such as fresh produce, deli food, and coffee.
The app is currently only invite-only in the West Hollywood area but I hope they expand into Orange County and the Inland Empire!
CRE Retail sales in the Inland Empire
The first half of 2021 is over. And thankfully for me and everyone else in the retail business and retail brokerage business, sales activity is definitely picking up.
The data in the chart below is from Costar and encompasses retail properties in the Inland Empire.
The sales volume in the first quarter of 2021 was $286 million, which was only about 1.76% higher than in 2020. Remember that COVID hit in March of 2020, and the second quarter of last year was when the world practically stopped. I had a $12MM deal stop dead in its tracks in early March of last year!
But in the second quarter of 2021, which just ended, sales volume was $340 million, which was 125% of what it was last year, but more importantly, it was 3% higher than the second quarter of 2019, which shows that we’re back to pre-pandemic levels.
Cap rate trends in the IE in the first half of 2021
In looking at cap rates, COVID didn’t affect cap rates at all. The investment properties that did sell during the pandemic were largely single-tenant properties leased to corporate tenants. Those types of properties, such as a Starbucks or Jack in the Box drive-thru, remained popular during COVID as investors looked for secure investments.
And without a lot of inventory on the market, competition for those properties drives cap rates downward. The cap rates were actually lower, on average in 2020 versus 2019. And in 2021, those cap rates have continued to decline. In fact, 2021 is trending to match 2018 as having the lowest cap rates in the past 10 years, at 5.84%.
So in conclusion, with California reopening and people able to shop again, the retail investment market is coming back to life. And with the uncertainty in the future tax laws, upcoming inflation, and the shaky stock market; investors who have been sitting on the sidelines with cash for the past 10 years are looking for opportunities to place their money. If you’ve been thinking about selling, now’s as good a time as any, so give me a call at (949) 209-9696 or email me, and I’d be happy to help you with the first step, which is a property valuation to see what your property is worth.
Lowering your Property Tax – Sponsored Ad
If you’re interested in lowering your property tax burden, Paramount Property Tax Appeal fights to reduce your property taxes, and their services don’t cost you anything unless they’re successful, since they’re paid a portion of the amount you save. They’ve been around since 2008 and have completed over 20,000 appeals, reducing tax assessments by over $1.5 billion in California.
If you think your property might have lost some of its value in the past few years, you could be eligible for a tax reduction. Hospitality, office, and retail buildings are commonly receiving tax reductions nowadays.
If you’re interested in lowering your taxes, please contact Jon Fleming at Paramount at (858) 245-0949, or email him at jfleming@pptaxappeal.com and tell him that Mike Lin sent you.
Who’s the top-rated fast food restaurant chain?
The American Customer Satisfaction Index (ACSI) recently conducted a study of the fast-food chains with the highest customer satisfaction level rating several chains across 11 different benchmarks.
Chick-Fil-A once again was on top, ranking #1 for the 5th straight year!
As you can imagine, some of the benchmarks measured include accuracy of the food order, food quality, and speed of checkout. But what I found interesting is that two of the 11 characteristics were related to the restaurant’s mobile app. They measured the quality of the mobile app as well as the reliability of the app. This just shows how important it is these days for fast-food chains to get their apps right since such a significant portion of their business is coming via mobile orders.
The shrinking footprint of many national big box retailers
As retail continues to evolve, one of the changes we’ve seen over the past few years is a decrease in the footprint of many big-box retailers.The National Retail Federation has boosted its sales growth forecast to 10-13%, the biggest jump in nearly 40 years, predicting that more shoppers will be returning to physical stores in the coming months after mostly ordering online from home over the past year pandemic.
Stores such as Bloomingdales, Target, Macy’s, Nordstrom, are adjusting to this change by experimenting with small-format stores that are only about 10-15% the size of their typical store. Here’s a chart of how small the new stores are, relative to their typical sizes. (No, that’s not a typo for Nordstrom. Some of their stores actually are under 3,000 square feet)
Aside from the obvious benefit of lower overhead, small-format stores allow the retailers to reach a greater number of their customers, as they can open more stores closer to their target market. Also, these smaller stores will turn over their merchandise more frequently, offering shoppers the ability to pick up bargains and unexpected finds during a shopping trip – kind of like treasure hunting. This is one reason that stores like TJ Maxx and Ross are so popular and have been relatively immune to online competition.
While this could be more efficient and space saver, it could also pose a risk to these retailers. People tend to change their preferences over the years. The time may come in a few years where shoppers want to go back to the way things were 10 years ago and may prefer to have more space. It’s going to be a lot tougher for these stores to upsize again after they’ve downsized.
How small businesses could get a refund on wages paid during COVID
If your business or your tenant’s business missed out on getting a PPP loan, there’s a program that can help.
Small businesses that have been paying their employees since the start of COVID may be eligible to get a refund of up to $28,000 per employee per year through the Employee Retention Credit.
To be eligible for the program, businesses have to have 500 or fewer employees and have quarterly revenues less than half of what they were in 2019.
Those businesses can claim up to 70% back on up to $10,000 in wages paid to employees, up to a maximum amount of $7,000 per employee for each quarter, or $28,000 in cash back per employee annually.
To claim the ERC funds, business owners have to complete form 7200 with the IRS or process it through a payroll company.
That’s all I’ve got for this week. Thanks for reading, and I’ll see you next time!
Connect with me here:
Website: https://mikelincre.com
YouTube: https://www.youtube.com/MikeLinCRE
LinkedIn: https://www.linkedin.com/in/MikeLinCRE
Twitter: https://twitter.com/MikeLinCRE
Email: mike@progressiverep.com
