March CPI Spike: Unlock the Secrets to Thriving Retail Spaces!
Marc Perlof • April 17, 2024
Hey, Retail Real Estate Rockstars! Dive into the March 2024 inflation scoop and its impact on your retail property investments. The US CPI rose by 0.4% month-over-month and, more notably, saw a year-over-year increase from 3.2% in 2023 to 3.5% in 2024. This stir in the financial pot is influencing everything from consumer spending power to the attractiveness of investing in retail real estate.
Here's why this matters to you:
- Consumer Spending Power: An uptick in CPI indicates that shoppers are still out there, spending away—music to the ears of retail spaces. Rising costs in gas, rent, and mortgages are putting pressure on household budgets, which could affect consumer behaviors and retail sales.
- Investment Appeal: Shifts in financial markets, like rising bond yields, could sway investors toward other avenues, impacting real estate values. Persistent inflation and the possibility of higher interest rates, as suggested by Jamie Dimon of JPMorgan Chase, indicate a tougher environment for cost-sensitive investments.
- Loan Interest Rates: The inflation data fuels speculation about interest rates, directly affecting your financing strategies for retail properties. The March CPI increase, coupled with a strong job market, may delay the Federal Reserve's anticipated rate cuts, influencing your decisions on refinancing or new acquisitions.
This year's rise in inflation and its potential to disrupt the Federal Reserve's rate reduction plans in June 2024 require a cautious approach. As Greg Friedman of Peachtree Group suggests, we might need to adjust expectations, as 3% could become the new norm over the previous 2% target. This shift in monetary policy could recalibrate asset values and open up opportunities in distressed assets.
Knowledge is your superpower. Understanding how broader economic trends, like inflation, affect the retail real estate market empowers you to make informed decisions, whether you're buying, selling, or holding onto your properties.
Call or DM me for more information. Let's leverage these insights to elevate your retail property investments.
How do you stay ahead in the retail real estate market amidst economic fluctuations and Fed rate speculations?
Cherished Malibu Seafood Shack The Reel Inn May Rebuild After State Reversal  Malibu’s one-of-a-kind seafood spot, The Reel Inn, may once again serve its signature fish puns and fried and grilled platters on Pacific Coast Highway after the state reversed its earlier position that blocked the restaurant’s return, according to Eater LA...
Hey, Retail Real Estate Rockstars! The Big Beautiful Bill (H.R. 1) has completely changed the rules for State and Local Taxes (SALT), which is great news for any property owner who has ever cringed when they see their tax bill. For those of you investing in retail real estate, this is the kind of victory that calls for a double espresso and a fresh pro forma. We're talking about actual tax relief in 2025. Let's dissect it. What Just Happened? The SALT deduction cap, once stuck at $10,000 per household, has officially increased to $40,000 for joint filers and $20,000 for single filers — but only between 2025 and 2029. After that, it’s back to the old cap unless Congress re-ups¹. Important Clarification for Property Owners While the IRS frames the new SALT cap in terms of individual filers ($20,000 single / $40,000 joint), the impact depends on how your retail property is owned: LLCs, Partnerships, and S-Corporations (Pass-Throughs): Income, expenses, and property taxes flow through to the owners’ personal returns. The higher SALT cap allows greater deductions here, boosting post-tax cash flow for the individual owners. Trusts & Estates: Similar pass-through treatment, meaning beneficiaries or trustees may capture the benefit depending on structure. C-Corporations: The SALT cap generally doesn’t apply, since corporate taxes are calculated differently and deductions follow corporate rules. REITs (Public or Private): REITs have their own tax regime, but shareholders who receive pass-through income may benefit at the individual level. Direct Individual Ownership: If you hold the property in your own name, property taxes fall directly under the SALT deduction rules. If you live in a high-tax state like California, New York, or New Jersey, this means you can deduct a lot more of your state income, property, and local sales taxes on your federal returns. Why Retail Property Owners Should Care More Deductible Property Taxes You can lower your taxable income on your federal return by deducting a larger portion of your high property taxes on retail assets. Boosts Post-Tax Cash Flow Increased deductions = less tax paid = more cash in your pocket. Offsets Reassessment or NNN CAM Spikes With inflation and property tax reassessments squeezing margins, this SALT cap increase gives you some room to breathe¹. Attractive to High-Income Buyers New investors seeking tax efficiency may find your retail property more alluring if you offer larger deductions. Strategic Planning Window: 2025–2029 These changes expire after 2029, so use this window wisely — structure sales, 1031 exchanges, or renovations when you can best leverage the deduction bump¹. Real Data, Real Impact The original SALT cap from the 2017 Tax Cuts and Jobs Act was projected to cost Californians alone over $12 billion in lost deductions annually². Nearly 30% of households in high-cost areas maxed out the previous SALT deduction limit². What About NNN Leases? Here’s the twist: if your property is on a triple-net (NNN) lease, your tenants — not you — pay the property taxes. For Landlords: The SALT cap change doesn’t directly benefit you, since you aren’t the one writing the property tax check. For Tenants: They may be able to deduct more of those property taxes on their federal returns, depending on how their business or personal tax filings are structured¹. Smart Move: Share this info with your tenants. Suggested Subject Line for Tenant Email: “You May Benefit from New Tax Deduction Rules (H.R. 1)” A simple note saying, “The new federal tax law (H.R. 1) increased the SALT deduction cap for 2025–2029. Since you pay property taxes under your NNN lease, this may be relevant for your tax planning. Please confirm with your CPA.” That small gesture positions you as knowledgeable, supportive, and proactive — which builds goodwill and strengthens tenant relationships. If you’re considering a sale, refinance, or exchange between now and 2029, let’s talk strategy while this deduction window is wide open #RetailRealEstate #CommercialRealEstate #TaxStrategy #SALTdeduction #PropertyOwners
The Iconic Reel Inn Malibu To Say Goodbye After 36 Years Plans to resurrect The Reel Inn Malibu after the Palisades Fire have been shelved following a decision by the California Department of Parks and Recreation not to renew the restaurant’s lease, as reported by The Wall Street Journal. The move effectively closes a 36-year chapter for the 144-seat seafood shack on Pacific Coast Highway, long recognizable for surfboards on the walls, clever signage, chalkboard menus, and the relaxed Malibu customers...
