Nationwide, new retail space construction ticked up 0.9 percent in the second quarter of the year, to 72.1 million square feet.
Still, it trails the 10-year average of roughly 78.9 million square feet.
Fifteen markets accounted for 47 percent of the total national construction number, with Texas leading the way. Three big cities in the state — Dallas, Houston and Austin — together accounted for 21 percent of all retail building in the country, with 15 million square feet under construction during the period.
Not surprisingly, most of the other active markets are across the Sun Belt portion of the country, including Phoenix, Las Vegas, Chicago, Charlotte, Atlanta, and Miami.
The numbers come from CoStar, a provider of online real estate and analytics. Brandon Svec, national director of retail analytics at CoStar, said that the overall limited amount of construction activity “reflects a development environment that remains difficult to pencil in most markets.
“The sharp rise in land prices, construction costs, and interest rates over the past several years has pushed required rents well above prevailing market levels for many retail formats.” He also said that even in markets with strong population growth and leasing demand, achieving returns that justify ground-up construction remains challenging. Beyond cost pressures, developers remain cautious following years of heightened supply risk awareness, while retailers continue to favor measured, capital-disciplined expansion strategies.”
According to published reports, centers that are anchored by grocery stores or otherwise cater to neighborhood needs are driving most of the construction activity in the retail sector. Multi-use centers that incorporate residential components, entertainment and dining options, and services such as medical offices are also outperforming the overall retail sector.