Dog Food Via Ups

During the past 6 months, I have changed some of my shopping habits and started doing more Internet shopping. One reason is that there is a greater choice of products to meet my needs and another is simple economics. For example, I needed a special light bulb for a floor lamp at our office. I found a store about 10 miles away that had the bulb in stock for $10. Then I went on-line and found the same bulb for less with no sales tax. I figured that if I drove 20 miles to pick up the bulb (at 20 miles to the gallon) I would use a gallon of gas and the trip would cost $3.50. My alternative was to wait two days and have the bulb delivered by UPS. Guess which one I chose.

Now there are some things that don’t lend themselves to delivery such as groceries, large construction items and large bulky products, although my son has started ordering his dog’s food online so maybe that’s not entirely true. However, there are also some items that require in-touch decisions such as clothes and fashion items. Some things however such as shoes are easier to find on-line and then have delivered than to go to a store. To get the right size my wife orders two sizes and sends one pair back making sure that returns are postage paid.

I get the feeling that as we go from “bricks to clicks” the demand for certain types of retail space will decline as well as the need to have inventory of goods in local warehouses. The demand for small local warehouse storage space will decrease as logistic companies can move goods overnight from larger central warehouses. For retail space, the number of stores may remain the same but the size of stores will decline as the need for large inventories decline.
These changes in buying habits will have consequences beyond just the real estate industry. For example, in Florida we don’t have a state income tax instead generate state revenues from real estate and sales taxes. If more and more goods are purchased “out-of-state”, sales tax revenues will not increase at the same rate as the population increases. If sales tax revenues decline and demand for state services increases, there could be a movement to increase the sales tax, add a tax on to services, or consider a state income tax. The consequence of an increase in the sales tax may be more “out-of-state” purchases which will only make the problem worse. A similar issue has arisen with the tax on gasoline sales. The maintenance of the road system depends on the gasoline tax. Unfortunately as gas prices rise and cars become more efficient, we drive less by shopping on-line and we use less gasoline resulting in the state collects fewer taxes to support the roads.

So how does this impact real estate investment decisions? We will still go shopping and still have the need for retail/services space. Those things which cannot be delivered will still need space. Personal services such as doctors, barbers, beauty salons, gyms, restaurants and bars are some that come to mind. On the other hand, services which can be done remotely don’t need expensive local space and can be located anywhere. For example, who really wants to go into a bank when you can make deposits and withdrawals at an ATM and pay bills on-line or with your phone?
Unless we see the changes before they happen we won’t know how to get on the right side of the trends. Call us. We are always looking for the impact of future trends on real estate investments.

By Tom Dixon