Shopping Center Investing 101: Avoiding Bad Retail Locations (Watch This First!)

Hey Everybody, Joseph Gozlan with Eureka Business Group, and we’re continuing our series of Shopping Center Investing 101. And today we’re going to dive deep into understanding where do we want to buy, which location, which market,
so let’s get into it.
We’re going to go from the outside to the inside. So starting from the big thing, which market do I want to buy retail and shopping centers? Is it Atlanta? Is it Dallas? Is it Texas? Is it Wyoming? I don’t know. What do we need to look at?
For us, when we invest in commercial real estate, the most important thing about a market is jobs. Without jobs. Nothing else works. We need to find out where are the employers, which employers are coming to town, how many new employers were added.
For example, we love Dallas, Texas. We’re biased ’cause that’s our hometown, but in the last few years we had major employers from all over the country migrate into the DFW area and make it their home base, which in turn created a lot of jobs in the metroplex. Employers like Toyota, like Universal Studio, like the PGA headquarters, and so on. So where do I find that information? Start looking at the news, whether it’s the national news like New York Times or the Wall Street Journal, or look at the local news of the Dallas, Fort Worth area or whatever market. What are the themes of the story behind the town?
Are you seeing a lot of unemployment, closures? Employers live in town like we hear about San Francisco, San Diego. Portland, Oregon, and so on. Or is it more like I mentioned earlier, employer coming to town, migrating into Dallas, into Austin celebrities moving to Austin. Happened a lot of that in the last few years.
Elon Musk moving and moving his Tesla and SpaceX factories over. What is the theme? What is the story behind the market? If the story and the theme is positive, About more job, more employment, more growth. Then that’s a good market for us to start digging into. Then we’re going to start looking within the Metroplex because a lot of people don’t understand that Texas is big and the Dallas Fort Worth area.
It’s a twin city Metroplex, Dallas and Fort Worth. That’s why it’s called DFW and the size of the Metroplex. If you took an outline around it, you would see that it’s about the size of the state of Connecticut. So when you’re dealing with a Metroplex that size. It’s important to know where in the Metroplex do I want to be?
There are going to be better cities than others. , there’s going to be better suburbs than other and there’s going to be those channels, those growth paths that a local expert can help you identify and so you make sure that whatever you buy, whatever you invest in is in the path of growth and not in the path of decline. We talk a lot about retail and retail is a great asset class to be in, but not all retail is born equally. This series is about shopping centers, and that’s one of the asset classes within retail that we highly recommend to all of our investors because guess what?
Amazon still didn’t figure out how to make your coffee, how to cut your hair, how to do your nails, and when you want to return something you ordered on Amazon Prime, what do they do? They send you to the UPS store at that retail strip.
So we really believe in shopping centers. We like what we call neighborhood retail. A lot of people confuse neighborhood retail with small. Neighborhood is not necessarily small. It just means it’s within the neighborhood and it serves the neighborhood. There are shopping centers that are massive with tens of stores and they cost a hundred million dollars, but they’re still considered neighborhood retail.
So neighborhood doesn’t necessarily mean small.
We also like to look at what is the demographics around that shopping centers because the type of businesses that would want to go into the shopping centers is highly dependent on the type of demographics around it, and it’s natural because if you can think about it, if I sell video games like GameStop, I can’t be in a neighborhood that the population is 70 plus years old.
It makes no sense. I want a younger community. I want a community that has kids that want to play the video games and teenagers that want to play the more sophisticated video games and the young adults that have the money to buy the consoles and so on. So the type of environment and the type of neighborhood around my shopping center is going to dictate what kind of tenants I can get into the shopping center.
There are a lot of tools out there like CoStar and Crexi and LoopNet that help you really understand what the demographics are and if you have a challenge figuring it out. Just reach out to a local broker and they can help you figure out what the demographic is around the property you’re looking to buy.
Another factor, a lot of businesses are looking at, and especially the national brand retailer, which you obviously want in your shopping center is traffic. How many vehicles per day (VPD) are driving on the street where that shopping center is on. So obviously, the more the better.
So if I am on a street that has 20K, 30K, vehicles per day, that is more attractive to a national retailer than being on a side street that only has 5,000 vehicles per day. Most national retailer would prefer streets that have more than 20, 000 VPD
  📍 A great source of finding traffic counts for a street is the state’s Department of Transportation website. For example, for Texas, we have the TXDOT website that gives us the street counts the vehicle counts on every street in multiple streets all over the state. So I can zoom in on the map and say, Okay, I’m looking at this street at that intersection and it will give me the exactly the counts. 
They do the count on every street every few years. So some of these will be 2-3 years old. Some of this will be from this year. But it still gives you and the potential tenant an idea of how many vehicles are going to be on that street every day.
 other things to pay attention to is what’s around the shopping center. If the shopping center is right next door to a church or right next door to an elementary school, this is going to create some limitations on the kind of tenants you can put in that shopping center. And it makes sense.
If you’re going to have a church on  one side and an elementary school on the other side, the city is probably not going to approve a liquor store in your shopping center. So while a lot of landlords don’t prefer those types of businesses in their shopping centers, it’s good to have something that have options versus something that is restricted from the beginning. If you’re looking at a brand new retail center that is empty, or you’re looking at a piece of land that you’re going to develop a retail center on,
you want to make sure that whoever you plan on putting in that shopping center doesn’t have direct competition right across the street or has complimentary kind of tenants nearby.
Another great tip we give our investors is check out the area of that shopping center in different times of days.
A lot of real estate will have different characteristic during the daytime, during the afternoon, and during the evenings, so you want to make sure you’re looking at it. You wanna make sure that you’re looking at it at night. You wanna look at it early in the morning and late in the afternoon.
What’s going on? Is there a traffic problem? Is there a business nearby that creates noise or create a disturbance in the flow of traffic or your customers might be impacted?
And that’s important to know as well
One more tip is always work with an expert. Find someone that knows the market, knows the area, knows the asset class and ask them questions. How is the market? How is that neighborhood? What are the comparable rents? Is the rents on the property comparing to what the rest of the market is.
Looking at what’s around that property behind the property in front of the property across the street from the property? . Is everything around it new? And this is the oldest one on the street. Is it the other way around? The entire street is 1970 product, and this was built last year. It’s important to understand the environment of that shopping center to really assess the value.
And do I want to take that one on? Or do I want to pass on this investment opportunity.
One of the other things we look at is who are the tenants in the shopping center and what is their dynamic in the area? What does that mean? If I have national tenants, Let’s say I have a Dunkin Donuts or I have a Papa John’s or I have a Pizza Hut or I have a Fast Signs, whatever it is, a national brand, but it’s a tenant on my property.
I’m going to look at what is the dynamic in the area for them, how many competition they are, how many Dunkin Donuts are within two mile radius, three mile radius. And that’s going to determine how much traffic that national brand is going to drive into the shopping center. And of course, the more traffic is driven into the shopping center, the more attractive the shopping center is for everybody, for the other tenants and for the person looking to invest in it
A really cool AI tool that generated a lot of interest in the last couple of years. It’s called placer AI. Their technology is amazing. They count how many people go into every store, every brand in every location. Which helps you understand that shopping center that has a Dunkin Donut. Is that Dunkin Donut considered a successful one or not? How are they ranking within all the Dunkin Donuts in the area or in the state or in the country? So obviously, if you have the number seven Dunkin Donuts that’s a good shopping center to look at.
Another market dynamic factor we’re looking at is what else is being developed in the area? Are we looking at a shopping center that is in the middle of an old established neighborhood? Or are we looking at a shopping center that is in a developing area? How many apartment buildings are being built right now in the immediate area?
How many lots have already broken ground and started shoveling dirt around? Which means in the next two years, there’s going to be a lot more apartments or a lot more building or a lot more offices in the area. And that’s obviously going to contribute to the shopping center in terms of traffic and more bodies in the area that will use the services of your clients, which are businesses.
Let’s recap what we talked about. We’re looking at everything from the outside in. We’re looking at The state we’re looking at the market. We’re looking at the area. We are focusing on growth, job creation. Is there new construction around? What kind of new construction is there around? Where are the competition?
Do I have national retailers trying to get into this area? How many vehicles per day are across that shopping center?
And of course vacancy. I didn’t forget about it. I just left it for last. So vacancy in their market in the area is very important. Across the country right now. Retail is that historically low rates of less than 6% in 2024.
That means there’s a lot of demand and not a lot of supplies. But that changes. That is different from a market to market. The vacancy rate in Wyoming might be different than Texas. The vacancy rate in Houston, Texas might be different than vacancy rate in Dallas, Texas. You have to make sure that you look at that vacancy rate in the local market.
How do I determine that? You’ll have to work with a professional. Unfortunately, this is not something that is super publicized. You might be able to find some reports on the CoStar News, or you might be able to find some reports on LoopNet. And so on.
There are all kind of resources online you might be able to tap to. But like I said earlier, the best resource you can find is a local expert that understand what they’re doing. They operate in that class. So I don’t find a multifamily broker to help you with your shopping center purchase and the other way around.
Your shopping center broker is not going to be the one to help you with your multifamily. So find a broker that knows what they’re doing that operate in the market in the asset class and they can help you figure all these things out.
So this was talking about the market dynamics and the location of your shopping center. It’s part of our series of videos about investing in shopping centers. So stay tuned for the other videos. Take a look at the links below in our comments and check out all of our other videos about commercial real estate and retail specifically.