The United States has more retail shopping center space per capita than any other country, at least twice as much as Canada and ten times that of France. Some attribute the growth in selling space to cheap imports from China and other Asian countries. Attractive margins result in stores buying more and consumers buying more. Thus, the necessity for more selling space.Brick Wall and reatil window

The glut of selling space in the United States is not new. Retail space began to grow with the Baby Boom generation becoming adults, getting jobs, starting families, buying houses, having kids and needing lots of products in a short period of time. They borrowed heavily and filled up the house. This growth began in about 1971, 25 years after the first Baby Boomers were born. This is a bubble that is ripe for bursting and in fact you can see it happening with the list of announced store closings each year.

With the move of older more affluent people to cities, the most desirable locations for stores that provide high quality products, lots of service and cater to a market niche will be in or near the city. As property values grow in cities, the less affluent segments of the populations will move into the suburbs. Because there are more suburban houses being vacated by Baby Boomers than purchased by younger buyers, housing prices will recede making the move for younger and less affluent families more affordable.

Very few strong independent retailers are finding profitable locations in suburban shopping centers. However, independents are finding profitable locations in or near cities. The city often provides some insulation against large chain store competition. A smaller retailer can carve out a profitable market niche of affluent shoppers. With high quality products and a high service orientation independents can develop a good business.

Shopping center developers are reacting to this trend by building life style centers where retail space is combined with residential and office space. If you can attract residents and office workers, retailers of some products and services can thrive. One trend is the development of life style centers along commuting routes. If it’s easy to catch the light rail into work and avoid the traffic, living farther from the city can be desirable. Retail space can always be leased where people live. The problem is attracting retailers to an area with low population density. Cities with low downtown residential occupancy generally have a very difficult time attracting retailers. All of the tax incentives they can provide won’t make a retailer profitable if there is not a sufficient population of residents.

In the 50s and 60s the great shopping was downtown. As people moved to the suburbs retail followed. This trend persisted for 40 years. We are now seeing this trend reverse and will see retail development expand in cities even as the total retail selling space in the country contracts.

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