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US Retail Construction Jumps 24 Percent

CHICAGO—Driven by the need to keep up with the changes wrought by e-commerce, in-store renovations have fueled a surge in construction spending by retailers.

By Brian J. Rogal | brianjrogal | | Updated on June 28, 2016

 

chi-steve.jonesheadshot (5) Steve Jones of JLL
CHICAGO—All of the major sectors of non-residential commercial real estate saw significant year-over-year increases in construction activity during the first quarter, but with a 24.4% boost, it was retail which led the way. Much of this new activity in retail was driven by retailers’ need to quickly respond to the ways e-commerce is reshaping consumers’ shopping habits and desires, according to a new outlook report from Chicago-based JLL . And although new construction has picked up, much of the recent spending is for the renovation of existing properties. “Shoppers now are more informed than they have ever been because of the Internet,” Steve Jones , international director for project management services, tells GlobeSt.com. And they increasingly patronize the stores and restaurants that provide the most convenience, low costs, and the best customer experience. As a result, the best retailers “continue to figure out what the customers are looking for and try new things.”   A customer may want to order products online through a mobile app, for example, “and pick it up on the way home without ever getting out of their car.” And for a host of retailers that means adding new features, such as drive-up windows, to their brick-and-mortar outlets.          The economic downturn caused retailers to shelve both new construction and renovations, and left many portfolios “tired and dated,” Jones says, and that has also fuelled the retail surge. In the first quarter of last year, retailers had 57.2 million square feet of construction underway, but one year later, that grew to 70.2 million square feet. Jones expects that construction spending will continue to grow in the sector. “People are getting a good return on their investments,” he says. And the surge should be national, and not confined to particular regions since retailers everywhere feel the impact of e-commerce. He also believes that most types of retailers, with perhaps one significant exception, now understand the importance of keeping up with the rapidly changing environment. “Department stores in general are struggling,” he says. “They haven’t embraced change.”

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