Inside the State of Retail Construction in 2019
Grace Ellis, Plan Grid Construction Productivity Blog
Posted: January 24, 2020 | Project Management
When walking through the double doors of Macy’s or WalMart, most people don’t spend a lot of time thinking about those vaulted ceilings or sturdy foundations. But as construction professionals, we sure do.
We know significant thought and planning goes into any and every construction project, and retail is no exception — it’s a field that is growing in unique ways. All that growth has encompassed a lot of change, bringing positive trends and posing constant new challenges.
On a personal level, consider where you were buying goods a decade ago versus where you are purchasing items now. Increasingly, consumers are foregoing trips to the mall and other brick-and-mortar retail locations with quick online shopping sessions where they can purchase pretty much anything — from a couch to paper towels — with one click.
Bottom line: it’s a consumer-driven sector, which means that the shopper’s convenience drives construction trends — such as the pending extinction of big-box stores. Consider other retail construction trends, such as the invention of smart buildings, the explosion of LEED construction methods, and the introduction of combined shopping and shipping options.
It’s a brave new world, which requires that the retail construction sector tap into new consumer behaviors, adapt to the needs and the changes they’re driving, and stay informed about the current state of the retail construction industry, the better to understand the future.
So what exactly is the current state of retail construction and what are the emerging trends you should know about?
Where Retail Construction Stands Today
The good news: Despite the changing landscape of consumerism, there’s still currently a healthy appetite for retail construction. This is primarily driven by retail sales, which despite the ever-more-diverse nature of their provenance, remain strong.
That said, these changes have driven negative trends as well (at least from the perspective of affected companies), such as store closures. The first quarter of 2019 saw the closing of almost 400 mattress stores, nearly 100 Charlotte Russe boutiques and 84 once-beloved Sears locations. Absorption of closed facilities has been sluggish, but it is happening. Detroit, Las Vegas and Atlanta are leading the charts, with high demand leaving less space vacant.
Naturally, this varies across the United States, with Portland, Atlanta and Orlando peaking at the moment, while typically strong markets such as New York City and Boston are experiencing some decline. With leisure and entertainment now the strongest motivator behind visits to physical locations (clocking in over professional services, fitness and dining), retail purveyors are forced to become more creative than ever. Those that can adapt will do well, while those that can’t will contribute to closures — casualties of the free market.
Top Retail Construction Markets in the U.S.
So where is retail construction flourishing in the U.S.? Right now, the top 5 retail markets (for active construction) across the US are:
1. Houston: 4.1 million square feet
2. Northern New Jersey: 4.0 million square feet
3. Long Island: 3.9 million square feet
4. Dallas/Fort Worth: 3.3 million square feet
5. Miami-Dade County: 3.2 million square feet
So what’s driving the growth of these key markets? There are a large number of mega-projects being planned and delivered in these cities. For instance, out of the 40 million square feet of Class A retail expected to be delivered in 2020, malls make up about 16.7%, aided by mega-mall projects like the American Dream in New Jersey and Miami.
Dallas is still showing strong for retail construction due to redevelopment efforts. For instance, a wellness company called Life Time is building an “18-story, 400-unit luxury residential tower … as well as a Life Time Athletic Club and other amenities, as developers across the country lure residents with walkable projects.” Impressively, “Once construction starts, Life Time Village at Dallas Midtown will be the company’s largest such endeavor to date, building on Life Time’s plans to extend its brand beyond the walls of being an athletic club. Life Time is also planning similar village-like concepts in Coral Gables, Florida, near Miami, and Henderson, Nevada, near Las Vegas.”
Four Key Retail Construction Trends
Overall, retail construction is driven by many consumer needs and behaviors, but four of the most notable include:
1. Rise of Mixed-Use Properties
Mixed-use means two or more uses located in one large property space, most commonly office and retail, office and residential, or residential and retail. Of the three types, projects that include retail are turning out to be exceptionally vibrant.
“Retail merchandising is dictated by the layout and scope of a project but is critical to its soul and vitality,” explains Metro Commercial, adding that walkability and a healthy lifestyle are prime drivers of mixed-use spaces that incorporate retail. “A variety of full-service and fast-casual restaurants with open storefronts and outdoor seating, grocery, in-depth fitness, spa, and beauty, as well as other convenience uses that provide lifestyle amenities. Whole Foods Market started anchoring mixed-use developments 10 years ago and healthy grocery store Sprouts is now in the game.”
2. Renovation Nation
Adaptive reuse is a massive trend these days. As we’ve discussed before, many companies are only interested in new builds, but retail construction also includes a large portion of renovations and refreshes of existing structures. As big-box stores steadily close, that’s a lot of acreage that opens up to development. Smart retail construction will do something with all that space.
This doesn’t necessarily mean buildings must be ripped down entirely, points out Voeller Construction: “Many buildings that have been around for a long time are modernizing and streamlining their operations to be more effective, efficient, and sustainable.” That need could represent a lot of good work for companies prepared to take on the challenge.
3. Alternative Use of Big-Box Space
You love Stranger Things, right? (If not, stop reading this article and go binge all three seasons on Netflix right now, then come back to us.) Aficionados of season 3 got to enjoy the retro vibes of Starcourt Mall, once an honest-to-goodness mall in Duluth, Georgia. It closed years ago, explains Hoar Construction (the original builders), “But the production team from the TV series Stranger Things breathed new life into the abandoned mall, resurrecting it into … a brand new attraction. in Hawkins, Indiana.”
Sure, not every mall can get such a Hollywood-style makeover, but there are plenty of uses for dead space (not including tearing them down for scrap and entirely new developments). For instance, we can transform them into housing with courtyards, connected by light rail or electric buses. Just leave it to forward-thinking developers and construction firms to breathe new life into the malls and centers in which we used to spend significant time.
4. Malls Are Going Experiential
Retail construction is also starting to respond to the massive increase in the desire for experiences. People, especially millennials, are tired of being house poor. Nor are they happy heading to the mall simply to buy a few shirts and make-up. More and more, they want to spend their money on doing things, a desire to which smart businesses will cater.
This is true for malls as well, which are jumping on the bandwagon by providing “lifestyle centers and destination places for not only traditional retail shopping, but experiential uses like eclectic restaurants, grocery marketplaces, entertainment, live events, music, nightlife, and more,” according to an expert quoted in Bisnow. The prospect of the rise of experiential centers is a pretty exciting one. And that’s before you take into account skydiving centers, trampoline amusement parks, or Ferris wheels, which retail destinations are also starting to incorporate.
Or how about the House of Vans, championed by the classic shoe company, which is a “location where art, music, BMX, street culture and fashion converge.” In 30,000 square feet, you can find “a cinema, café, live music venue and art gallery,” while “the bottom floor holds the most unique feature of the building; the concrete ramp, mini ramp and street course.”
Companies Driving Retail Construction’s Future
Not surprisingly, some retail construction firms are doing a stellar job grabbing hold of these opportunities. Which companies are driving retail construction? According to BDC, the top 5 performers include:
1. PCL Construction Enterprises: $597,679,293
2. VCC Construction: $497,753,319
3. Whiting-Turner Contracting Co.: $459,159,319
4. Shawmut Desing and Construction: $441,400,000
5. EMJ Corp.: $331,472,940
If you’re trying to catch up to retail construction giants, you can do so, as long as you follow the right trends. That means adopting the latest construction strategies and technologies, identifying the right opportunities and coming up with creative uses for reusable unoccupied space, and catering to the customer’s desire for convenience and experience — all in one.
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This article republished from the Plan Construction Productivity Blog. www.blog.plangrid.com