The Aftermath Of Retail’s Burst Bubble? More City Centers In Secondary Markets

by MR Magazine Staff

As the first quarter of the year nears its end, publicly traded retailers are reporting Q4 earnings that not only missed analyst estimates, but reflected a decline in same-store sales that has led to a huge wave of store closures rivaling that of the recession. CEOs are saying the bubble has burst and commercial real estate experts are in agreement, saying retailers today are paying the price for lofty expansion plans set in motion during the early 2000s. CoStar Group real estate economist Ryan McCullough said overambitious expansion plans coupled with the slowdown of the Great Recession and the growing prevalence of online shopping has taken its toll on the sector. “The overreaching retail strategy during the last cycle was expansion,” McCullough said. “We saw rapid growth in store count and not necessarily in the strongest locations.” Retailers’ rapid build-out plans were in many cases an effort to appease investors and boost stock prices and analyst ratings — but these plans have led to less productive stores that are stretched too thin in many cities — particularly secondary markets. Read more at Forbes.