In 2006, NASA launched the New Horizons spacecraft for a nine -year mission, the Steelers defeated the Seahawks, and the Nintendo Wii was introduced to America’s youth. It was also the year retail development in the U.S. hit an all-time high of 261 million square feet under construction, with ambitious mega entertainment facilities underway. Within five years, construction halte
d in 2011 and new deliveries plummeted 77 percent to a mere 59 million square feet. Today, U.S. retail sales have fully recovered, yet national retail construction remains at low levels.
“Demand for quality retail space continues to outpace new construction, resulting in consistent vacancy compression and rising rents across most major markets,” said James Cook, Director of Retail Research for JLL. “In the last two years vacancy rates have fallen 120 basis points and even with new supply we anticipate that vacancies should remain low through 2016.”
JLL’s Development Outlook uncovers that calculated retailer expansions combined with slow and steady construction levels are keeping the retail supply/demand equilibrium in check:
- In 2015, an expected 82 million square feet of retail space will deliver. Standalone retail buildings, small neighborhood centers, grocery and power centers make up 76 percent of current retail space under construction.
- The top five markets for new retail construction make up 40 percent of the current pipeline: Northern New Jersey (3.3M), South Florida (3.2M), Houston (2.9M), Dallas Fort Worth (2.7M) and Boston (2.6M).
- Low new supply combined with modest major-market net absorption of nearly 28 million square feet has pushed national vacancy down to 5.8 percent.
“Necessity focused retail space is driving construction this year, with most new space diversified and driven by grocery or service-based retailers. We are seeing a small amount of marquee projects that are destinations but that are not the norm,” added Larry Jensen, Director of Development for JLL who is leading the development of the one-million-square-foot Williston Crossing development in Williston, North Dakota for Stropiq. “In the coming year, we expect to see a focus on redevelopments of existing retail centers, expansion of centers when possible and much repurposing and repositioning of properties to better serve their markets both with new retailers and a new ambiance.”