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Retail Openings on the Upswing

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New housing starts in 2013 have been a good indicator of other things—namely some interesting developments in retail, such as a surge in physical store openings. From its meetings with multiple retailers and landlords at retail and real estate conventions, RBC Capital Markets estimates that 83,749 stores plan to open over the next 24 months, with 42, 757 stores planning openings within the next 12 months. This forward movement illustrates a five-year high with year-to-date increases of 2.1% and 2.8% respectively, according to RBC.

In urban and suburban markets, the recession pushed some prime large tracts of real estate to market. Dave Messner, VP of real estate at Costco, which is slated to open nine stores this year, noted, “The economic downturn opened up a number of non-traditional sites to us, including car dealerships that went out of business, government-owned parcels and former schools. In certain cases, cities were trying to plug holes in their budgets and they were selling land.”

Many big-box retailers are anxious to site their stores in densely populated urban areas, since they are realizing the potential untapped market and willing to compromise on store prototypes and develop smaller footprints. Conversely, cities are becoming more accepting of big boxes. Urban dwellers are looking for value places to shop and cities need tax revenues, so the marriage of city and big-box stores make sense.

The Mid-Atlantic and Northeast has seen demand grow for retail space in the last 18 months. Tom Simmons of Kimco Realty says, “We’ve seen sales growth in high-end retailers and value-oriented retailers. Value retailers like TJX, Ross Dress For Less and Bed, Bath and Beyond have been interested in doing a lot of deals. Further, higher end retailers like Nordstrom and Saks have been increasing their offerings with expansions of their Nordstrom Rack and Sacks Off Fifth concepts.”

Wal-Mart plans to open 115 stores this year. With a mix of smaller format spaces, including its Wal-mart Neighborhood Market, which average around 42,000 square feet and Wal-Mart Express stores, which run about 15,000 square feet, Wal-Mart realizes the success and growth potential of this mix and plans to capitalize on it.

Commercial real estate and equity firms are also seeing acquisitions and openings by CVS and Walgreens. Walgreens and its subsidiary Duane Reade will be adding 25 and 15 stores respectively; and CVS will open 150 stores this year.

The automotive sector like Pep Boys, O’Reilly Automotive, Autozone, and Advance Auto Parts are expanding their locations. Hundreds of the discount dollar stores will be popping up throughout the country (Family Dollar Stores, Dollar General, Dollar Tree). Free-standing supermarkets (Whole Foods, Trader Joe’s, Piggly Wiggly, Publix, Aldi, Albertsons); convenience stores (7-Eleven, Murphy/Wal-Mart, Cumberland Farms, WaWa) are all opening new locations. Toys, men’s apparel and crafts stores also top the sector list for current store openings.

What this means is an expanding retail job market as well, as retail recruiting firms gear up for meeting the rising demand for retail staffing. This mixing of formats for big-box retailers also bodes well as different footprints will offer new and better opportunities for shoppers and manufacturers, since many of these retailers will be expanding categories and product selection. The potential for retail growth in cities should be strong as the economy churns forward.

TAGS: retail, staffing,
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