Magazine article Mortgage Banking

Retail Construction Could More Than Double in 2013

Magazine article Mortgage Banking

Retail Construction Could More Than Double in 2013

Article excerpt

* Retail real estate performance is expected to improve in 2013, but might not see dramatic improvements until employment growth accelerates, according to Jones Lang LaSalle, Chicago.

On the plus side, relatively stable pricing and pent-up demand for non-durable goods could drive up consumer spending slightly in 2013, while store opening plans have reached a four-year high, the firm said in its 2013 National Retail Real Estate Outlook report.

"Retailers will open as many as 78,325 stores in the next two years--up 11 percent from year-end plans in 2011," said Greg Maloney, Jones Lang LaSalle's Americas Retail president and chief executive officer.

Construction could add 52 million square feet of space in 2013--more than double the 20 million square feet completed this year, Maloney said. In addition, "property subtypes, markets and retailers that are doing well now will continue to strengthen their position, while those that are weak and struggling will stumble along or fail entirely," he said.

Maloney noted several sources of uncertainty that have hindered retail sales will ease as 2013 approaches. "The November election is over and [our] forecast assumes that lawmakers will act to avert a fiscal and economic collapse, even if only by means of a temporary compromise," he said.

But Maloney added that other factors continue to weigh on consumer confidence: Lingering risks to retail sales in the new year include a potential spike in energy prices, natural disasters, geopolitical instability abroad, and structural shifts in buying patterns and online purchasing.

Retail real estate fundamentals also have positive and negative trends that will largely cancel each other out in 2013, leaving overall occupancy and rental rates rather stagnant, Maloney said.

Some retailers will expand aggressively, but Maloney said he has seen a concurrent trend toward smaller store footprints. …

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