Monday, June 2, 2014
Shopping Center Construction and Redevelopment is UP
Hunter Communications Original News Source:
Link to article:
US Shopping Center Development, Redevelopment Quietly Up
Excerpt: "One of the main takeaways from last week's ICSC RECon conference for Matt Winn, global retail COO in Atlanta for Cushman & Wakefield, is that retail developers are back in business in the U.S and around the world.
'For the first time in a few years, large scale mixed-use projects seem to be getting traction,' according to Winn. 'In the U.S., there is no doubt that they are more confined to the smile markets of the East and West Coast as well as the Sun Belt. But they are definitely there.'
U.S. shopping center completions increased for the first time since 2007 last year, with nearly 400 new centers totaling more than 129 million square feet delivered, according to Cushman & Wakefield's Global Shopping Center Development Report, issued in Las Vegas last week. Canada also saw a dramatic increase in new shopping center deliveries in 2013 following six straight years of declining construction volume.
Granted, the numbers are low compared to history, with growth in GLA (gross leasable area) at roughly early 1990s levels. However, deliveries constituted a 12.7% increase over 2012, accounting for roughly 18% of total new space put in place since the economic downturn in 2008.
New development and redevelopment were buzz words on panels and in the hallways and exhibition halls of the Las Vegas Convention Center last week. Activity at present is more of a ripple than a wave due to a lack of high-quality assets and construction lenders who remain wary about financing ground-up projects, panelists at the Marcus & Millichap Retail Trends 2014 in Las Vegas agreed.
'The biggest issue a high-growth retailer has lack of available real estate,' said Ted Frumkin, senior vice president of business development for Sprouts Farmers Market, one of the sleeper success stories among specialty grocery tenants with 172 stores in eight western states. '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.'
To date, Sprouts had been able to find second-generation space. But as those locations fill up, the chain has explored a variety of options for growth, including working with smaller preferred developers and major developers such as REITs, Frumkin said. Sprouts is also watching the Safeway-Albertsons merger for opportunities to take store spaces opening up due to consolidation.
The strategy is working, with Sprouts opening 19 new stores this year, including an expansion into Atlanta in June, and a goal of 14% annual growth in new stores and a long-term white space goal of 1,200 units, Frumkin said.
'We're going to have to work a lot harder out in the markets. 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.' "