Looking for proof that the retail real estate industry is in a better place than it was even a year ago? New development is no longer a distant pipedream, but a tangible possibility as industry players begin conceiving new projects.
Some companies, primarily publicly-traded retail REITs, might already be close to putting shovels in the ground as they sign up expanding retailers to go into their new centers. Taubman Centers, for example, has several projects in pre-development stage which may be announced either later in 2013 or 2014, according to Steve J. Kieras, senior vice president of development with the company. He notes, however, that since most of the opportunities for new building are currently in urban infill markets the development sites will tend to be smaller than Taubman has been used to.
The same has been true for shopping center REIT Regency Centers. The company has seven new centers in the planning stages, including projects in Miami, San Francisco, Washington, D.C.,and Charlotte, N.C. But whereas before Regency’s centers would average approximately 100,000 sq. ft. in size, the newer projects will be in the 65,000-sq.-ft. range, according to Scott Prigge, senior vice president of national property operations. The smaller footprints, including smaller anchor spaces, can accommodate better quality tenants such as Whole Foods, Publix and Trader Joe’s, he says. And they might fit bitter in the top-tier urban markets Regency is focusing on.
Retailers have been expanding enough that even smaller regional developers have been thinking about new projects. For example, Richard J. Kuhle, president of Phoenix-based firm Vestar, expects to see new retail construction intwo or three years down the line, followed by Arizona and Nevada. Vestar doesn’t have anything in the pipeline yet—for the moment, the firm is focusing on acquisitions,—but Kuhle foresees entering the development game in the relatively near-term future.
“As a company, we will prepare ourselves for that part of the market to come back in the next couple of years,” he notes. “A lot of the retailers right now are doing better, so probably over the next two or three years there will be enough demand from anchor tenants that it will make sense to develop in a rational manner.”