Which Retail Sector May be Overbuilt?

“Consumers still have a desire to get what they want, when they want it—so, in a neighborhood sense, I haven't seen the elimination of neighborhood shopping centers—it's a very healthy segment and I think it will stay that way.” That is according to Ron Goldstone, SVP of Farbman Group. But what is he worried about?

“I'm a little nervous that the small shop retailer/food sector is getting a little overbuilt,” he tells GlobeSt.com. “There is a lot of growth in the small shop retail/food sector. It seems to be exploding nationally and they're all wrestling for the high rent, 1,600 to 2,400-square-foot, highly visible retail locations—whether they're planting in front of office buildings or a corner or logical retail corridor.”

He adds that “The movement toward getting the best locations and weaning down square footage is huge right now, too. I'd say the buzz word of today is getting lean and mean. A lot of retailers are looking at slightly smaller footprints and focusing more on sales per square foot.”

But he says that most retailers are expecting at least 12-18 months of positive sales. “There's a lot of product out there, so there will be quite a bit of maneuvering on the part of a lot of retailers where boxes that weren't available in markets that they couldn't get in previously are available today,” he says. “The best locations will still command the best rents and will have the most perspective retailers chasing them. The mid- to low-quality locations are really the tough sectors in retail. Retail in a pure square footage standpoint is, I believe, overbuilt. I also am hopeful that a lot of this overbuilt retail can get absorbed with creative uses.”