A lot of new retail developments are popping up—on flyers. All the studies show that the delivery of new retail space across the country, even in Dallas-Fort Worth, will again be at or near 20-year lows in 2012. But I’m starting to read projections that say almost twice as much space could be delivered in 2013. Some estimates are as high as 3.5 million square feet.
Although this would still be less than half of the space delivered in 2008, I think these estimates are little more than wishful thinking.
I talk with more than 10 brokers or developers per week about new deals they’re working on for many of the tenants that I represent. Some plans seem plausible, but others seem very ambitious. And even the more credible deals are a long shot to be delivered prior to 2014.
Tenants are starting to look at new developments and discuss rents that work for new development, but the key word is “starting.” Although both debt and equity are readily available for acquisition, tenants are still very hesitant when it comes to new development, unless you’re talking about single tenant build-to-suits.
As the inventory of existing quality regional sites is shrinking and tenant sales continue to increase, the need for new product will grow. Unfortunately, I believe it will be at least a couple of years until all of the necessary ingredients line up for developers to have success putting new projects together.
Until then, I think a lot of the new developments that we see will be strictly on paper.
John Zikos, a partner at Venture Commercial Real Estate, specializes in landlord and tenant representation, leasing, income property sales, disposition, and new development consulting. Contact him at email@example.com.