The higher and record gasoline prices paid by Americans have had and will continue to have a significant affect on the value of income property. These new prices are changing the spending and driving habits of the American consumer. This is affecting where the consumer shops and the employment base of many communities. The combination of both changes will affect the values of income properties today and in the future. Not all property types will be treated equally. Some are going to benefit, and others will be adversely affected.

Retail Property

The primary changes brought about from the record gasoline prices are the shopping and buying habits of the American consumer. On October 2, 2006 Net Gain Real Estate published an essay titled “The Demise of the Regional Mall in America”. The current record gasoline prices have increased the probability of the predictions in that essay becoming a reality. More and more consumers are not getting into their cars to shop and buy. All the anchors, national franchises, and independent lessees at the different retail centers have hedged their bets with their own Internet web sites. Consumers are finding that these web sites are becoming more reliable, are able to satisfy their needs, and they are using them at a progressively faster rate. The result of these changes will be weaker leases and lower cash flows at many retail properties.

Multi Housing

Multi housing communities will benefit from the record gasoline prices. The reason is that most multi housing communities were developed with excellent egress and ingress and are near major employment centers. Those that are close to public transportation will have an even greater advantage. Needless to say, those developers that bought cheap land in the hinterland will not see an advantage to the record gasoline prices.

Office Building

Office buildings have been going through an evolutionary change. Technological advances have eliminated many types of office positions (i.e. secretary, assistants, clerical, print and office copy, etc.). Considering that the average office employee uses 300 square feet, this has created a reduced demand for square feet within office buildings. The offset is that these efficiencies have resulted in sufficient growth to offset the loss of demand.

Those office buildings that have participated in this offset and are located near public transportation and/or have minimal commute times will be a strong beneficiary of today’s record gasoline prices.

Warehouses

The higher cost of transportation has motivated many businesses to manage their inventories more efficiently. One method is to use more warehouse space by reducing the number of times they replenish their inventories. Warehouses and particularly modern and large ones that are well located in relation to major highways and railroads are going to play an important role in the efficiencies of today’s businesses.

Summary

There is a common denominator that appears in all commercial real estate that will benefit from the record gasoline prices: The proximity to public transportation, highways, and railroads appropriate for their lessees.