Article source: ConstructConnect
An ‘Overhang’ of Space in ‘Bricks and Mortar’ Retail
With jobs growth so strong and incomes rising, a main driving force behind the ten-year expansion in U.S. gross domestic product (GDP) has been consumer spending. Retail sales as a key component of consumer spending, however, have been taking quite a different path than in the past. Physical shopping outlets have been closing at a truly alarming rate, to be replaced by warehouses to fulfill purchases made over the Internet.
The construction industry welcomes the proliferation of distribution centers but laments the loss of ‘bricks and mortar’ retail building activity. Moreover, it’s not just the pullback in the square footage of retail space that is disappointing for construction. Just as big a problem is the ‘overhang’.
Vast amounts of empty space have been accumulating that will require years of gradually increasing occupancy to fill back up again.
U.S. Retail and Food Services Sales
When the 2008-09 recession was at its worst, U.S. total retail sales nosedived by nearly -13.0% year over year. As Graph 1 shows, U.S. retail sales then recovered in 2010 and 2011 to between +5% and +10% y/y. For the most recent seven-plus years, they’ve been mainly between 0% and +5%.
An often-quoted target for y/y ‘current dollar’ retail sales is +5%. After ‘normal’ inflation is factored out, +5% becomes +3% in ‘real’ terms, which provides healthy backing for GDP advancement.
