Mountain View, California (EastBayDaily) — NetGainRealEstate.com, the leading Internet provider of independent, value-added income property analysis, has released a year-end report detailing the impact of record crude oil prices on commercial real estate investment.
The main ingredients produced from a barrel of oil affect both the business community and the consumer. Some of the company types affected in the business community are those that involve airlines, trucking, automobiles and all the cottage industries that support their activities. Although the impact on these businesses is significant, NetGain’s real interest is the affect that crude oil prices will have on consumers. It is consumers that account for 70% of our Gross Domestic Product (GDP), and it is consumers who live, work and shop at the core types of commercial real estate: Residential, office and retail.
The record price per barrel will affect consumers two ways. First, more money will be spent to heat and/or air condition homes. Second, consumers will spend less time in their cars. The first means they will have less money to spend. The second means they will change how they spend their money. In other words, the American consumer has less money to spend and is changing their buying habits.
Those changes will have the most dramatic impact on retail properties. The consumer will still shop, but will have an alternative: The Internet. The most recent data from the Census Bureau of the Department of Commerce shows that the growth rate of e-commerce far outpaces that of traditional brick and mortar retail stores.
The financial impact on commercial real estate from the record prices at the pump is not coming tomorrow — changes are already taking place. The International Council of Shopping Centers’ U.S. chain store sales index was up just 1.6% in October, the weakest result since 1995. What’s more, according to Thomson Financial, two-thirds of the nation’s largest retailers missed sales estimates for the month.
In the end, comprehensive due diligence will make or break a commercial real estate investment. Future markets will not bail out poorly located income properties purchased with inadequate due diligence.
To access the full report on the affect of spiking oil prices on commercial real estate investment, go to http://www.netgainrealestate.com.
Net Gain Real Estate is a wholly owned subsidiary of NetGainR.E.Inc providing commercial real estate investment tools and income property analysis. In addition to capitalization rate recommendations, bi-monthly essays, a comprehensive due diligence checklist, and an extensive question and answer section, investors may also find a composite index of REIT data at http://www.netgainrealestate.com.