Wednesday, April 28, 2010

Is Retail Development Picking Up?



In a retail climate often described as a veritable desert for new developments, there have been recent signs of life. David Sobelman, Executive Vice President of Calkain Companies, has observed that in high credit tenants, there has been a relatively unnoticed trend in developments.

Below he answers five questions relating to this trend:

1. What, if any, developments are you seeing in the net lease or retail markets?

High credit tenants, those with investment grade credit ratings, seem to be the only tenants currently seeking expansion opportunities. These include Walgreens, CVS, TD Bank, Chase Bank, Blue Cross Blue Shield.

2. Do you see any trends developing which may indicate our future?

It seems that there is more “chatter” about looking for new sites; either ground up development or retrofitting existing locations for new tenancy.

3. Have you seen any tenant development lately? If so, how much and concerning which tenants or sectors?

Short answer, yes. Walgreens is active, as is CVS. Drug stores, c-stores, some banks are taking over vacant bank sites through mergers mostly though.

4. Why do you think there is a preference to develop new properties when vacancies are very high?

Cheap land. Lower construction costs, developers being able to negotiate better contracts with contractors to build sites and increase their overall returns.

5. Are these developments related to certain areas, such as the urban market?

There is a definite trend towards proven markets, urban real estate falls into that category. Less speculative areas are sought out more than “in the path of growth” areas that were popular 3-5 years ago.

2 comments:

  1. The points Mr. Sobelman makes are in line with some of the trends we have been tracking as a commercial general contractor. Subcontractor costs haven't been this low in 5 years. For developers thinking about redeveloping an existing property we offer a couple of tips on our blog at commercialconstructionblog.com
    Chuck Taylor
    Englewood Construction

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