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September 19, 2014

'Retailers Are Hungry for Space'

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'Retailers Are Hungry for Space'

Shopping center completions rose last year for the first time since 2007. Nearly 400 new centers totaling more than 129 million square feet were delivered last year, according to data recently presented by Cushman & Wakefield’s Global Shopping Center Development Report. 

"For the first time in a few years, large scale mixed-use projects seem to be getting traction," says Matt Winn, global retail COO in Atlanta for Cushman & Wakefield. "In the U.S., there is no doubt that they are more confined to markets of the East and West Coast as well as the Sun Belt. But they are definitely there." 

Shopping center completions still remain low by historical standards, but deliveries were 12.7 percent higher than 2012 and shopping centers have accounted for about 18 percent of total new space since the economic downturn in 2008.

"The biggest issue a high-growth retailer has lack of available real estate," says Ted Frumkin, senior vice president of business development for Sprouts Farmers Market. "We want to grow, but when we've gone out, the build to suit or new development has not been there over the last couple of years. ... Even in high vacancy markets like Phoenix, a lot of the space that's empty is not desirable for a lot of tenants. The lenders still are not freeing up the capital to build projects for us." 

Over the next three years, an additional 758 centers totaling 120.5 million square feet are expected to be added to the nation’s inventory, according to C&W and CoStar Group data. 

"These new projects are all positioned as either luxury, mixed-use or value retail and outlet centers—the physical embodiment of the barbell of prosperity we have been tracking since 2009," says Winn, adding the new shopping centers will likely be small to modestly sized and average under 160,000 square feet. One-third of the construction is expected to be centered in California, Texas, and Florida. 

Developers are looking to ramp up development of retail as supply dwindles, store chains look to expand, and the economy improves. 

"Retailers are hungry for space in existing centers and proven locations, and will ultimately drive an increase in new construction, but that isn’t happening yet," says Michael Bilerman, a Citi analyst. 

Source: “U.S. Shopping Center Development, Redevelopment Quietly Ramp Up,” CoStar Group (May 29, 2014)

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