The recession reduced retail construction spending early and deeply, but now most of the decline should be behind us. Construction spending is down 48% over the last two-and-a-half years, and the value of retail construction starts reported by Reed Construction Data fell 41% in 2009 vs. 2008. Construction spending is expected to drop 5-6% more by late 2010; the decline will be close to 10% after adjusting for project cost inflation. Retail construction starts are expected to be unchanged early in 2010 and then begin rising quickly later in the year.
The reasons for the steep construction declines differ for developers, large retail chains, and smaller retailers. Shopping center and mall developers cut construction spending before the September 2008 credit freeze because they saw declining returns for commercial real estate investments. With recovery, prospective returns will be rising again by the end of the summer.
Construction spending in 2009 fell 50% for shopping centers and 40% for shopping malls. Retail chains, which slowed spending in late 2007 and cut more deeply when the credit freeze began, have maintained steady spending in recent months. Building supply centers cut spending 57% in 2009. Smaller retailers continued to expand construction spending until just a few months before the credit freeze, then sharply slashed spending when they lost access to credit and suffered a drop in their ability to offer lenders collateral and equity participation. Construction spending for standalone stores fell 70% in 2009. Spending declined about 45% for auto dealers, auto parts/service facilities, and restaurants and bars. —Jim Haughey, BD+C economist
Related Stories
Products and Materials | Sep 18, 2017
Product roundup: Paints + coatings
Duranar Sunstorm from PPG, Fluropon from Valspar, and Extreme Cover from Sherwin-WIlliams are just three of the 12 products highlighted in BD+C's September Product Roundup.
Sponsored | Products and Materials | Sep 15, 2017
Creating a movement: How Mamava, Konrad Prefab and ALPOLIC partnered to change the culture of breastfeeding
Since its conception in 2006, the Mamava lactation pod has undergone several changes in design.
Lighting | Sep 1, 2017
Industrial lighting system converts blue light to green, yellow
The SpectraLoc LED blue-spectrum high-bay fixture converts harmful blue light under 500 nanometers to benign green and yellow light.
Products and Materials | Aug 30, 2017
Emergency communications system keeps university students and staff safe
The system provides advanced fire detection and notification, and allows for emergency messages to be transmitted in campus buildings through fire alarm speaker devices.
Products and Materials | Aug 30, 2017
Insulated wall system cuts down installation time
ProGUARD DP is a combined system cuts installation time down to one-third that of traditional wall systems.
Products and Materials | Aug 29, 2017
Product roundup: 12 inventive ceiling + acoustical systems
EchoStar Panels from Kirei, EZ Stab from CertainTeed Ceilings, and Integrity 4200 from Rockfon are three of the products included in BD+C's August Product Roundup.
Products and Materials | Aug 17, 2017
Scuff-resistant paint is tailor-made for high-traffic commercial spaces
SCUFF-X provides the level of scuff-resistance of two-component coatings.
Products and Materials | Jul 24, 2017
Nu-Wood brackets give 110-year-old hotel another level of distinction
One of the goals during the hotel’s 2014 and 2015 refurbishment was to create a low maintenance exterior.
Products and Materials | Jul 21, 2017
Acrylic-infused wood flooring brings durability for commercial spaces
The product incorporates an acrylic-infused top layer.
Sponsored | Products and Materials | Jul 19, 2017
Building community with every structure
Fabcon precast helps take community projects further.