NEW YORK CITY—The Americas contain by far the largest share of shopping center space at north of 2.25 billion square feet, with the US alone accounting for more than two billion square feet of the total. That preeminent position won’t change by the end of 2016, although China will add more than four times as much new retail space as the US over the next two years: 161.3 million square feet compared to 36.7 million feet domestically, even if the Americas have more projects under construction.
That Asia should lead the way with retail development, even as economic growth in the region slows slightly, bodes well for the global recovery generally. So says Cushman & Wakefield in a report issued Monday to coincide with ICSC RECon.
“Retail real estate development is often seen as barometer as the global economy shifts from recovery to growth,” says Matt Winn, global retail COO and head of retail in the Americas. “While the South American economies have slowed, Brazil, Colombia, Peru and Chile will all see additions to their supply in the next few years.”
Winn adds that even in the US, “where the ratio of shopping center space per capita is higher than everywhere else in the world,” there are projects of more than 400,000 square feet apiece under way. Among the largest of these is the retail component of the Howard Hughes Corp.’s Downtown Summerlin master-planned development, scheduled to open in October in a Las Vegas neighborhood not all that far from where the retail industry has gathered for RECon.
An encouraging backdrop for development is improving global economic fundamentals and increased consumer confidence, says C&W. Global GDP is forecast to grow at 3.4% this year, the highest rate since 2011.
C&W notes that household spending will play a significant role in the realization of GDP gains, with spending in the US, the euro zone, and China leading the way. Although its growth has eased in recent years, China is still expected to record a global best 4.5% rise in consumer spending in 2014, a number that will accelerate to 5.1% in 2015.
More than 1,650 new shopping centers were delivered between 2012 and 2013 across the Americas, Europe and Asia. This represents about 210 million square feet of gross leasable area, or about 7% of overall existing inventory. The US, Russia, Brazil, Mexico, India and China drove the majority of the newly added space.
India and China will continue to loom large in development this year, with Asia accounting for well over half the ‘14 global development pipeline of 125.6 million square feet, to the point where James Hawkey, C&W’s retail services leader for the Asia-Pacific region, warns of oversupply in some Chinese markets. Even so, the world’s most populous continent will end ’16 with inventory of about 450 million square feet, a fraction of the 2.3 billion square feet the Americas will contain by then.
Global investment in shopping centers was “relatively healthy” last year, and is even stronger this year. Global retail transactions in the first quarter rose 42.7% year over year at $37.9 billion, C&W says. Momentum in the US and recent trends in India are largely driving that growth, while investment in Brazil has waned.