Shopping center industry expected to improve this year
The nation’s shopping center industry grew only slightly last year, reaching nearly 105,000 centers in operation, but appears poised to pick up the pace, the International Council of Shopping Centers said Monday.
There was little growth in the number of shopping centers between 2008 and May 2010, the most significant slowdown in expansion since at least 1971, according to a study by real estate data provider CoStar Group Inc., which was commissioned by the International Council of Shopping Centers.
The near-pause in construction “was not surprising, due to the 2007-2009 recession and the difficulty in securing capital from banks and other lending sources,” said Michael P. Niemira, director of research and chief economist for the council.
Shopping centers account for about 47% of the nation’s retail space. There were 104,990 centers with 7.24 billion square feet of leasable space as of this month, up from 104,148 with 7.16 billion square feet of space in 2008, CoStar said.
Both CoStar and the council have an optimistic outlook on retail real estate during the latter half of 2010, when they expect growth within the industry to pick up markedly.
The retail segment of the commercial property market had the largest market capitalization ($2.98 trillion) at the end of 2009, more than office ($1.64 trillion), industrial ($1.07 trillion), hospitality ($895 billion) and multifamily properties ($1.40 trillion), CoStar said.
“Prospects for the retail real estate industry appear to be improving, and the sector, in time, will likely regain its investment luster,” Niemira said.
Unlike industrial and office properties, which are still facing rental declines as leases turn over, many retail landlords already renegotiated and dropped rents for existing tenants, said Norm Miller, vice president of analytics for CoStar.
“Consequently, this flexibility by retail landlords spurred the profit recovery for major retailers and a quicker bottom for rents compared to sectors not as flexible on rents and concessions,” Miller said.
