The retail market is has been relatively healthy in major markets, but that isn't convincing developers to break ground. For the fourth consecutive Allen Matkins/UCLA Anderson Forecast developer sentiment survey, developers have not been optimistic about the future of retail development. In the most recent survey, the optimism for retail development was down in all six markets surveyed and below 50%, the barrier used to measure optimism.

Ecommerce is generally blamed for the anemic optimism in the retail market, and it is likely the cause for developer hesitation to break ground on new retail projects. “The optimism for retail hasn't been super high, and generally it is materially below the 50% mark,” John Tipton, operating partner at Allen Matkins, tells GlobeSt.com. “That is related to ecommerce. Today, people would rather hit click and have their goods delivered to them in a few days.”

While ecommerce is responsible for a dip in developer sentiment, Tipton says that there are some retail properties that are finding success by making renovations that create more of an experience-driven space. “A lot of the corner malls and retail malls really struggling,” he says. “What you see more of is renovation of shopping malls in to a retail experience. You are not going to the mall anymore to buy something. You are going because it is a place where you want to be and a place where you want to spend time.”

Specifically, he notes the Century City Mall, which is currently underway on an $800 million renovation. It is scheduled for completion at the end of the year, and is expected to be an experiential retail destination. “If you look at the concept and the amount of money that they are investing, you understand how important the retail experience has become,” says Tipton. “This construction job has been no stop since it began. It has been impressive.”

Interestingly, the survey was conducted during the announcement that Amazon would buy Whole Foods. It is hard to tell if the announcement came just before or just after the survey, and therefore if it had an impact, says Tipton, but it will not doubt have some affect on retail development. Tipton says that any projections about the effect on the market at this point would be pure skepticism. It will be interesting to take note of the next survey to see if that deal has any impact on retail development sentiment.

Allen Matkins

Instant Insights /

Ecommerce Dampens Optimism for Retail Development

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