Tiny Bubbles Make Larger Bursting Headlines
Business → Marketing & Advertising
- Author Trail Potter
- Published January 12, 2011
- Word count 580
The big bubbles make national headlines, the tech bubble, the housing bubble – they are opportunities to make a large profit if you manage to time the market right, buying early and riding on the rapid growth which is usually not based on sound financing or market demand, but entirely on hype and/or panic. Bubbles come and go, and while they are not a sound long-term strategy, they can provide short term relief.
Retail bubbles can provide tenants to a commercial property owner, even if it's for as long as a short bubble lasts – it's relief in a slowly recovering market. Even after the bubble shows signs of collapse, there will be enough movement to capitalize on the trend.
Take for example, the west coast frozen yogurt trend. This is only one example, and this bubble is close to ending, but the end may still take a year or more. Even if this business trend doesn't affect your region, the lessons can apply to the next trend.
Starting in 2005, ice cream and frozen yogurt stores had a bright future. A report from November of that year entitled U.S. Market for Ice Cream and Related Frozen Desserts, paints a rosy future for cold snacks. Citing the trend for Americans taste for $5 lattes, they set a $7 price point for a trendy treat. From '06 to '09, the retail frozen yogurt growth patterns bucked all trends in a recessed economy. By 2009, the largest competing chains, Pinkberry and Red Mango were locked what the locked in what the local papers called a Flavor War – each one introducing a new exotic flavor every month: green tea, pomegranate, and “Tangomonium”, fueled on Red Mango's part by a million dollar round of venture capital funding (yes, VC funding in April of 2009).
Even with a funding round in Spring of '09, Orange County's OC Register newspaper has predicted that the bubble has popped. Closures escalating throughout the western states, with Red Mango's flagship store closing in March 2010, and further closures of competing ventures Yogurt d'Lite and Wild Berries create a clear signal that this trend is ending.
Despite the bad news for the Frozen Yogurt entrepreneur and investor, this trend was a boon for the commercial property owner – particularly the strip mall. 2009 was a devastating year for strip malls and other commercial spaces, except for those who were able to ride the Frozen Yogurt wave, and were buoyed for a year while other property owners saw their losses mount.
In any economic situation, there are trends – some may be on the national level, some just local. A bubble may run itself out through over saturation (like Frozen Yogurt), while others may see a regulatory change (like payday loan storefronts). They are a cheap substitute for a long term tenant, for any kind of stable growth, but difficult times, short term rental income is better than nothing.
As a property owner, it's good to look for the emerging trends, and to cater to them as best you can. So often with a bubble, one trendy opening will attract others in the same area. It's common to find multiple storefronts in the same vertical space, all clustered around the same intersection.
Are there trends in your property neighborhood? Are there local businesses that have found a way to beat the stagnation? If something around you looks like a bubble business, maybe you can bring some of that bubble income to your pocket.
Trail Potter is a contributor to the Abacus Financial writing team based in Houston, Texas. He has a background in financial planning with a focus on real estate and commercial growth patterns.
Abacus Financial - http://www.abacus-financial.net (Los Angeles, CA)- is the national expert in workouts of distressed commercial real estate borrowers and operating companies.
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