The construction of new retail hits a 25 year low.
Posted by ChicagoismynewBlog! on January 28, 2010
Sure this sounds really doom and gloom but when you think of it, this was bound to happen, it just took a bit longer to happen than the housing fallout. Industrial, commercial, retail, and residential sectors don’t all fall or reach a low at the exact same time but just like the residential market, the retail market will get better soon. Not sure about you, but I still see stores and restaurants packed full of people spending money so I’m not too worried.
(Crain’s) — The construction of new shopping centers in the Chicago area continued to grind down in 2009, falling to its lowest level in a quarter century.
Retail construction dropped plunged 53% in 2009, to 1.7 million square feet, compared to 3.7 million square feet in 2008, according to an annual report by retail real estate brokerage Mid-America Real Estate Corp.Last year’s total was the lowest since 1984, when 1.6 million square feet of retail properties were completed.
Construction has plummeted nearly 80% since 2007, when nearly 8.4 million square feet was completed as many retailers were expanding rapidly to catch up with new residential development. The 2007 total was the highest since 1983.
Since the recession began in late 2007, consumers have cut back their spending, the retail industry has undergone a dramatic retrenching and construction lenders have little appetite to finance new developments of any type.
In 2010, the pace of shopping center development will remain unchanged at 1.7 million square feet, and will likely remain at that historically low level for several years, says Andrew Bulson, a senior vice-president with Oakbrook Terrace-based Mid-America.
In 2011, the pace of development will rise only “marginally,” he says.
“It’s perhaps the new normal for the foreseeable future,” he says.
Retailers still smarting from the recession are slow to expand and when they look to add locations are likely to focus on existing properties where rents will be cheaper. And amid the uncertain recovery of the national economy, investors are skeptical of backing new retailing ventures.
“The pendulum has completely swung in the opposite direction,” says developer Evan Oliff, president of Chicago-based Preferred Development Inc. “It’s about time….”