Advantages of Investing in Free-Standing Single-Tenant Properties

Retail real estate professional Terrence Sommerfeld is the owner of Metropolitan Real Estate Company in Chicago. Over the course of his career, Terrence Sommerfeld has been involved in the construction of several free-standing, single-tenant retail properties.

Free-standing, single-tenant retail properties are attractive to investors for several reasons:

- The properties are safe investments. The free-standing, single-tenant retail asset class is significantly large and boasts historical occupancy rates in excess of 95 percent, something investors find very comforting.

- The properties provide predictable cash flow. Single-tenant property lease terms usually range from 10 to 20 years, offering investors long-term cash flow guarantees.

- The properties have a passive nature. Many single-tenant property leases require the tenants to take care of operating expenses and capital repairs. This frees the property owners from operational obligations.

- The properties are in demand among established retailers. A well-positioned single-tenant retail property will attract the attention of established brands that have strong, verifiable credit.

- The properties provide liquidity. Because of the advantages stated above, these properties usually have a strong pool of buyers and sellers, which gives investors a quick path to liquidity if the need arises.

Three Retail and Commercial Real Estate Trends to Monitor in 2018

A former real estate manager with National Food Stores, Terrence Sommerfeld draws upon more than 50 years of experience in commercial real estate management as owner of Chicago-based Metropolitan Real Estate Co. In this capacity, Terrence Sommerfeld specializes in the leasing, management, and design of community shopping center developments and other retail spaces.

The United States economy as a whole improved in 2017 despite a distressed retail segment. Given recent changes to tax laws and other world events, below are three trends commercial real estate professionals need to consider.

1. Foreign lending - Despite being designed to benefit business with a lower corporate tax rate, the new tax laws could negatively impact banks around the world and their commercial real estate lending business. Bank of America and Citigroup have already stated the changes would lower their 2017 profits, while the implementation of the base erosion and anti-abuse tax could be a detriment to foreign banks that regularly shift money between different business units.

2. Changing demographics - There are now more Millennials than baby boomers and, as a result, the majority of real estate and consumer spending decisions are being made by people younger than 40 years old. While Millennials might gravitate toward experiences, baby boomers are retiring and moving out of the suburbs and into the city. Retail industry professionals must be aware of the changing preferences for experiences, services, and products of both generations.

3. Experienced-based retail uses - Because of changing demographics favoring Millennials, commercial real estate developers need to focus more on providing consumer experiences rather than products and services. Traditional retail space such as family clothing stores and department stores are going to be replaced at a rapid rate with restaurants, fitness and recreation facilities, hotels, and theaters.