Powered by an expansion in "Big Box" stores, the retail construction market is expected to post a respectable gain of 3% this year, with $24 billion in new starts, according to McGraw-Hill Construction Analytics. This would follow a 4% increase in 2005. However, the increase in dollar value masks a decline in actual per-square-footage being built.
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This year's softening in the housing market is already being felt in retail construction, which in a large part is driven by home building. MHCA predicts the slump in housing will lead to the physical volume of the retail market shrinking 2%, to 300 million sq ft this year. (ENR and MHCA are units of the McGraw-Hill Cos.)
While the largest projects are clustered in the southern states, that region will see notable declines in 2006 retail contracts as big box chains such as Wal-Mart and Home Depot curb their once aggressive expansion rate, according to an MHCA study. The pipeline of new work over $1 million, tracked by MHCA through the first nine months of this year, shows square footage of big box chains dropping by 22% in the South Atlantic region, while big box construction fell 24% in the East South Central region and 25% in western states.
Big box chains in general have been curtailing new store construction. Home Depot, in particular, has severely cut its new store devel-opment. Through September, new Home Depots totaled just 6.9 million sq ft nationally, a 52% drop from the same period a year ago. The reverse is significant, given that activity had been up 21% in 2005.
Largest Retail Building Starts
|PROJECT||Location||$ Mil.||Sq. Ft.|
|Hill County Galleria||Austin, Texas||$54.2||865|
|Oak Leaf Town Shopping Center||Jacksonville, Fla||$90.0||860|
|The Avenue Shopping Center||Nashville, Tenn||$90.0||819|
|the Shoppes at River Crossing||Macon, Ga||$40.0||694|
|Gulf Coast Town Center||Fort Meyers, Fla.||$60.0||625|
|Neighborhood Center at Parks||Houston||$19.2||565|
|DC USA Retail Mall||Washington, D.C.||$40.0||550|
|Union Lake Center||Millville, N.J.||$70.0||503|
|Philadelphia Outlets 100 Store||Philadelphia||$40.0||430|
|Dardenne Town Center||St. Louis||NA||425|
|Source: Mcgraw-Hill Construction Analytics. Starts 11/05 to 2/06. Area is thousand sq ft.|
Lowe's, on the other hand, has been on a construction-spending spree. Through September, Lowe's broke ground on 19 million sq ft of new store space, 7% more than one year ago. Lowe's is targeting the west coast for its current expansion.
Wal-Mart, which had been promoting an aggressive expansion program, cut the square footage of its building program by 21% through the first nine months of 2006, compared to the same period of 2005. Wal-Mart has faced a difficult year, due to slowing sales and strengthening opposition to construction in urban communities. The giant retailer lost battles to build new stores in Boston, New York City, Los Angeles and Oakland. This trend is becoming more entrenched and could slow Wal-Mart's expansion plans.
While big box construction may be showing its age, the shopping center is making a comeback in the form of open-air centers. Several of these centers began in 2006. Some notable starts include the $90-million Oakleaf Town Center in Jacksonville, Fla., the $60-million Gulf Coast Town Center in Fort Myers, Fla., the $40-million Wayside Commons in Burlington, Mass., and the $20-million Shoppes at Pembroke Garden in Miami. Others in the pipeline include the 600,000-sq-ft Promenade Shoppes in Pearland, Texas, and the 650,000-sq-ft galleria in Bee Cave, Texas.