Thursday, June 26, 2008

SHOPPING CENTER CONSTRUCTION BOOMS AS STORES CLOSE

NEW RULES The number of shuttered box stores and empty strip malls has expanded dramatically over the last six months, according to data compiled by commercial real estate brokers and investment advisors. And the situation is likely to get much worse. Chain retailers have announced plans to close more than 6,500 outlets by year's end, even as shopping center construction continues at a furious pace. Developers are on track to bring an estimated 137 million square feet of new retail space online this year. That's more than the average annual growth during the first half of the decade.

"Alarming" is how one commercial brokerage described the unabated pace of shopping center construction. It is an indication of the degree to which the forces driving retail expansion have become untethered from actual consumer demand. Communities that have not taken steps to limit retail sprawl through their land use policies are at risk of seeing growing numbers of buildings become derelict.

Already, vacancy rates at strip malls have reached a twelve-year high, according to the research firm Reis. For the first time since the firm started gathering data in 1980, the total amount of occupied retail space has begun to decline in absolute terms.

Between 1990 and 2005, the amount of retail space per capita in the U.S. doubled, from 19 to 38 square feet. In contrast, European countries generally have less than 10 square feet per person.

This level of expansion has not been supported by population and income growth. Since the early 1990s, per capita retail spending, adjusted for inflation, has increased by only about 14 percent.

By flooding markets with an excess of shopping space, chain retailers have not only caused a drop in customer traffic in downtowns and other areas home to independent businesses, but have increasingly cannibalized sales at older shopping centers and big-box stores, thousands of which are now vacant.

Many chains are now downsizing. Linens N' Things is shuttering 120 stores. Ann Taylor is closing 117. Home Depot has abandoned 15 locations. Starbucks is eliminating 100 outlets. The International Council of Shopping Centers has forecast that a total of 6,500 chain store closures this year.

The retail vacancy rate in San Antonio is likely to rise to above 20 percent over the next year, according to experts. Kansas City is on track to hit 17 percent.

2 Comments:

At June 26, 2008 6:03 PM, Anonymous Anonymous said...

Rampant greed, ala the development booms, usually is untethered to anything resembling empirical realites, Sam. The pathologies of greed in corporations is really not so very different from the pathologies of greed in individuals, and has the same devastating results, albeit on a much larger scale of damage.

 
At June 26, 2008 7:33 PM, Anonymous Anonymous said...

I hope these sprawl developers take a beating financially. Here's one indication they may: US retailers to close hundreds of stores.

 

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