Now that January is almost over, we’re leapfrogging over 2019 and looking forward to 2020 and beyond. Real estate is a long-term game, so what we do in 2019 will drive our results in future years, and our success in 2019 will be rooted in 2017. Our Founder, Bill Rothacker has 35+ years of experience in this field, so we spent some time with him discussing what he sees as impacting the next few years—in retail, the economy and real estate.
The Changing Face of Retail
You won’t find us on the bandwagon predicting the death of retail, instead we see a bright future, but one filled with change. As Bill explains, “retail has been constantly changing over the 35-plus years that I’ve been in business. Right now, some aspects are declining and others are expanding dramatically, but change is always the common thread.”
“Together, traditional retail and e-commerce are coming together, and that gives consumers better service and higher-quality goods.”
Bill identified two key factors in the strength of retail for the future—convenience and service. Technology has allowed retail to serve more customers in a better way, whether it’s moving the logistics of a retail store to lower-cost alternatives, which lessens the need for space, or getting that must-have item delivered right to your door. But as digitally native brands turn to physical stores, it bodes well for retail as a category. “People made a lot of assumptions about the ability of e-commerce to service people, and the fact is, it comes up short in a few areas. As millennials grow older, I think they’re going to need more of these physical stores.” Together, traditional retail and e-commerce are coming together, and that gives consumers better service and higher-quality goods, and ensures that the future of retail is strong, even as is continues to evolve.
What goes up
Bill says he’s been anticipating the next economic downturn “for the last eight years of the ten year cycle.” Why? Because when you can’t predict when something’s going to happen, it’s best to act as though it’s happening in twelve months; strengthening the balance sheet and prepping the team to weather whatever storms are brewing. Right now, he’s predicting that the downturn will hold off until 2020—with a variety of factors pushing it back, including economic stimulus and slow growth during much of this cycle. When it comes, he’s hoping for moderate correction, but has some concerns. “One thing that increases the possibility of a significant correction is the stimulus provided by the Tax Reduction Act. It’s very similar to what happened under President Bush, which prolonged the expansion and provided more room for a severe correction. It’s impossible to predict, you just have to act as thought it’s going to be severe when it comes.”
What About the West
With a business focused in three markets, all in the West, we keep a particular eye on what happens here in the region. Regardless of what happens with the national economy, we have a few advantages from a real estate development perspective. As Bill explains, challenges up front can provide protection down the road: “these markets have fairly high barriers to entry, and also to executing projects, which means that the markets aren’t as vulnerable to overbuilding, so we’re protected a little bit.” These markets are also filled with businesses that continue to thrive even in down markets, businesses that are driven by corporate needs and corporate growth, rather than real estate supply and demand.
As we look at new projects to start in 2019, we’ll be keeping an eye on the future—looking for opportunities to include forward-looking retail brands, how convenience drives the success of a project, and how the economy responds to the ever-changing business landscape.
