Less Whoopie, More Shopping, Leads Developers to Overdo It
Durex condoms did a survey and found 57 percent of American women would rather go shopping than have sex. More surprising is 42 percent of men said the same thing. With fewer people staying home to have sex, they need places to go and satisfy their primal urges another way--by buying stuff.
Developers have responded by constructing a huge amount of retail square footage. Forbes notes, “Since 1995, the number of shopping centers in the U.S. has grown by more than 23 percent and the total gross leasable area by almost 30 percent, while the population has grown by less than 14 percent.”
John McNellis says retail is over built everywhere except “where land is scarce, zoning hard and everyone wants to live. Basically, ocean-view cities.” McNellis wrote a book on real estate development, “Making it in Real Estate” and knows developers develop when...they can. McNellis writes,
We approached one town on the knife-edge of nowhere and inquired as to whether we could build a supermarket. “When can you start construction?” came the official response and permits were issued forthwith. We built the market almost overnight, put it up for sale and six months later without a single offer we were reminded of the downside of ignoring location.
This retail binge is starting to produce victims. The website RetailDive.com listed its 15th major retailer bankruptcy on July 15th--Alfred Angelo.
The Wall Street Journal reports today that there are too many supermarkets. “A massive build-out by retailers has left the country piled up with grocery shelves as consumers are shifting from big weekly shopping trips to more snacking and to-go meals. The mismatch has flattened retail sales and leaves the industry vulnerable to a wave of closures that some executives, bankers and industry experts think is coming soon,” write Heather Haddon and Julie Jargon.
Co-Star says, today there is nearly 30 times the amount of space allocated to groceries at major chains that there was in 1950. All kinds of companies are getting into the grocery business. Wth shopping the activity of choice and all of these options, no wonder 36 percent of the U.S. population is considered obese. However, “There’s only so much food we can buy,” said Suzanne Mulvee, director of research for CoStar.
Millennials aren’t wild about weaving through a big store pushing a cart with a busted wheel. They want quick pre-made meals to pick up and go. In turn, Kroger and Walmart are halving their store building budgets.
“Food retailers are also chasing a shrinking pool of consumers,” write Haddon and Jargon. “Not only is U.S. population growth slowing, America’s largest demographic groups—millennials and baby boomers—aren’t at their food-buying peaks.”
Barclays Capital Inc., says 38 of the top 50 grocery markets in the U.S. are already too saturated by food retail per capita or are on track to be so by next year.
So supermarkets (and all retail developers) back away from the building binge buffet. “Everybody should stop growing,” said Barclays analyst Karen Short. “It would make the whole industry much healthier.”