News & Opinions
The latest news and insights from Hanley Wood’s outspoken experts and key thought-leaders throughout the residential and commercial design and construction industry.
Mixed Use in an Overretailed Landscape
David W. Myers / UrbanLand / July 1, 2013
Thousands of retail complexes across the United States, from small strip centers to megamalls, stand vacant or suffer from double-digit vacancy rates. Sears, JCPenney, and RadioShack, for decades among the most profitable retailers in America, may need to close a combined 1,000 or more stores over the next year or two, say some independent researchers. And several publications, as well as many Wall Street analysts, have declared that rising internet sales on websites such as Amazon.com and eBay will bring the demise of thousands more bricks-and-mortar stores and hundreds of malls sooner rather than later.
But, to paraphrase Mark Twain, the death of the retail real estate market has been greatly exaggerated. Many older centers are getting facelifts, particularly those in urban areas where residents have above-average incomes. Development in suburban markets, stagnant over the past decade, is expected to pick up in the years ahead as rebounding home sales and values help fuel slow but steady growth in consumer spending.
And while sales over the internet will continue to chip away at those in traditional retail centers, the rate of that incursion is slowing—in part because more savvy retailers are launching aggressive online marketing efforts of their own.
“Retail developers, owners, and retailers themselves are not going to roll over and play dead,” says Matt Kircher, executive managing director of Cassidy Turley’s Terranomics retail services unit in Burlingame, California. “They’re altering their marketing strategies, floor plans, tenant mix, and the like to ready themselves for the future.”
Housing, Spending, and Retail
Retail real estate development is as cyclical as homebuilding—perhaps even more so. Builders of retail centers, whether they specialize in big malls or smaller complexes, not only have to consider interest rates, the health of the overall economy, and local supply and demand trends, but also must factor in such dynamics as changes in disposable income and evolving consumer spending habits as they plan projects and decide whether to move forward with them.