Retail Real Estate Challenges? Win with This Advanced Technique!

Marc Perlof • October 12, 2023

Hey Retail Real Estate Rockstars! Here are some challenges of Long-Term Retail Real Estate Ownership for Property Owners and their Solutions


1. Fixed Rents vs. Market Rents:

  • Challenge: Long-term leases might be locked in at rates below the current market value.
  • 1031 Solution: Use a 1031 exchange to sell underperforming properties and reinvest in properties with higher rental potential or in areas with rising market rents, deferring capital gains taxes in the process ¹.


2. Reduced Flexibility:

  • Challenge: Being tied to a specific property type or location can limit adaptability.
  • 1031 Solution: If a property no longer aligns with market demands, utilize a 1031 exchange to transition into a more suitable property type or a more promising location, all while deferring taxes ².


3. Maintenance and Upkeep:

  • Challenge: Aging properties can require significant maintenance.
  • 1031 Solution: Instead of continually investing in an aging property, consider using a 1031 exchange to transition into a newer property that requires less upkeep, preserving capital and deferring tax liabilities ³.


4. Changing Consumer Behavior:

  • Challenge: The evolving retail landscape might make some properties less competitive.
  • 1031 Solution: Use a 1031 exchange to transition from properties that no longer align with consumer trends to those that do, such as transitioning from traditional retail spaces to experiential retail or mixed-use properties.


5. Economic Fluctuations:

  • Challenge: Economic downturns can lead to property depreciation.
  • 1031 Solution: If a property is at risk of significant depreciation due to economic factors, a 1031 exchange can be used to move investments to more economically stable areas or into different types of properties that might be more resilient.


The Bottom Line

The 1031 tax-deferred exchange is a powerful tool for property owners to navigate the challenges of long-term ownership. By strategically leveraging this provision, owners can adapt to changing market conditions, optimize their portfolios, and defer significant tax liabilities.


Attention retail real estate property owners! Don't let your investments stagnate. Harness the transformative power of the 1031 exchange to rejuvenate your portfolio, optimize returns, and stay ahead of the curve. Dive in now and discover the magic of tax-smart investing! Call, Text, or DM me for more information.


Have you ever wondered how top real estate moguls continuously upgrade their portfolios without the tax burden? The answer might be simpler than you think!


#RetailRealEstate #1031Exchange #MarcRetailGuy #TaxSmartInvesting #AdaptAndProsper


 https://legal1031.com/1031-exchange-resources/the-benefits-of-a-1031-exchange/

2. https://legal1031.com/1031-exchange-resources/the-benefits-of-a-1031-exchange/

3. https://legal1031.com/1031-exchange-resources/the-benefits-of-a-1031-exchange/

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • October 31, 2025
Fed Cuts Rates Again, Boosting Confidence in CRE Recovery In a closely watched decision, the Federal Reserve cut its benchmark interest rate for the second consecutive month. The new target range of 3.75% to 4% reflects continued efforts to ease financial conditions and stabilize capital markets, even as economic signals remain mixed...

Will LA’s $30 Minimum Wage Reshape Retail Real Estate or Just Empty Storefronts?

By Marc Perlof • October 27, 2025
If you own retail real estate, here’s what might change for you. The hospitality workers’ union UNITE HERE Local 11 is pushing a bold new initiative to raise the City of Los Angeles $30 minimum wage for all city employees by July 1, 2028¹. While the first ordinance covered hotel and airport workers, the union’s latest ballot measure would extend this wage citywide². As an expert in retail real estate, here’s what that means for your properties. Higher wages will immediately impact tenant affordability and rent-to-sales ratio calculations that drive lease viability. Many retailers operate with payroll costs at 25 to 35 percent of gross revenue, leaving little cushion for a wage that’s nearly double the current state minimum of $16/hour³. When margins tighten, tenants face a choice: raise prices, cut staff, or negotiate rent. For landlords, that translates into valuation pressure because commercial property values depend on stable rental income. The small business impact in Los Angeles could be profound. Independent restaurants, boutiques, and service operators, the lifeblood of local shopping centers, run on razor-thin profits. If forced to meet a $30 wage, some may relocate to cities like Burbank or Glendale, where municipal wage laws are lower, or close entirely⁴. That shift could spark short-term vacancy spikes and longer lease-up periods. Still, there’s a possible upside. When low-wage workers earn more, they spend more locally. For well-positioned centers with necessity-based tenants: grocers, pharmacies, quick-service restaurants, rising wages could strengthen revenue resilience. Key takeaways for retail landlords: Audit tenant financial health and exposure to rising payroll costs. Review lease clauses that address operating-cost pass-throughs. Model new rent-to-sales thresholds under a $30 wage scenario. Track tenant retention and market-rent shifts across nearby cities. Prepare for valuation adjustments as cap rates reflect greater income volatility. If you own retail real estate in the City of Los Angeles, now’s the time to stress-test your portfolio. Let’s review your leases before this wage shift hits. Call or DM me for more information. When the $30 wage arrives, will higher pay strengthen LA’s consumer base or hollow out the city’s small-business retail core? #LosAngeles30MinimumWage #RetailRealEstateInLosAngeles #TenantAffordabilityAndRentToSalesRatio #SmallBusinessImpactLosAngeles #CommercialPropertyValuesLosAngeles

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • October 24, 2025
Toys"R"Us opening 10 flagships, 20 seasonal shops — here are all the locations The brick and mortar comeback of Toys"R"Us is moving into high gear ahead of the toy industry’s busiest season. In September, the retailer said that, in partnership with Go! Retail Group, it was planning to open 10 flagships and 20 seasonal holiday shops in the U.S. by year's end...
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