Grocery centers and outlets lead development

Real Estate Snapshot - Grocery centers and outlets lead development

New York City -- A retail real estate market report, issued by Savills US retail group, found that, even as recovery remains slow, a few formats are progressing at a faster clip than others.

According to Gerry Mason, head of Savills, the majority of recent and planned retail development is in the grocery-anchored and outlet center category. CBL & Associates and Tanger Outlets are among the most active developers scheduled to break ground in 2012.

The largest U.S. retail real estate investors, according to the report are Blackstone, New York City, which transacted $10.73 billion in 2011; DDR, Beachwood, Ohio, which transacted $1.66 billion; and Cole RE Investments, which transacted $1.52 billion in 2011.

The report provided a general overview of the U.S. market as it stands, which showed that marginal vimprovements in the second half of 2011 are leaving most cautiously optimistic about 2012.

However, it still suggested more retailers will fail in 2012. “The retail market is still purging tired concepts and inefficient business models,” said Mason. He suggested Talbots could be a victim, as it is accepting bids to be purchased and will likely file for bankruptcy protection if a deal can’t be reached. Sears Holdings Corp. is another, as it recently announced plans to close 100-120 of its total 2,200 full-line stores in 2012.

“Also, in fourth quarter 2011, Gap announced plans to close 189 stores in the U.S. and downsize numerous Old Navy locations. More closings could follow as the company shifts its focus overseas,” Mason said.

Retailers expected to lead the expansion charge are discount retailers such as Dollar General, Ross Dress for Less and Big Lots). These retailers can fill large footprints and generate strong sales volumes in a recessionary environment, said the report. Other notable movers will be Nordstrom, J.C. Penney, Starbucks and Apple, said the report.