Overbuilt or Not?

Main Story: New Directions

Has the industry been overbuilding? It depends on who you ask. Statistics from Reis Inc., which looks at 80 markets and measures malls, shopping centers and power centers, show that the recent cycle did not match the 1980s. The difference is even more stark if you look at completions as a percentage of existing inventory.

In the 1980s, developers were delivering more than 6 percent of the current inventory at the peak of the cycle. This time around, the number was less than 2 percent. Data from CoStar and PPR, however, shows a slightly different picture. CoStar tries to capture every retail property in the nation through its continual sampling of the market using its fleet of data collection trucks. Its data includes stand alone space and small shopping centers.

PPR also attempts to capture all retail properties using a combination of its own data and information from McGraw-Hill Dodge Construction. Their numbers show that deliveries rivaled the 1980s peaks in terms of raw square footage built. Another factor to consider — the amount of speculative building was down compared with past cycles because the industry “was only in recovery mode for a few years,” says Reis chief economist Sam Chandan.