An annual study of global retail construction found that builders completed 134.5 million sq. ft. (12.5 million square meters) of shopping centers globally last year, up 11.4% from 2015. Seven of the top 10 markets for retail completions are in China. Rounding out the top 10 are Mexico City, Moscow, and Melbourne, according to a Global Shopping Centre Development study from the CBRE Group, Inc.
In the Americas, retail completions jumped by nearly 44% last year, due mostly to a surge in construction in Mexico. An economic lift from Mexico’s thriving automobile manufacturing industry helped spur developers to complete 14 million sq. ft. (1.3 million square meters) of retail centers in three major Mexican cities last year. In the U.S., markets delivering the most new supply last year included Houston, New York City, and Honolulu.
The Asia-Pacific region (APAC) — China, in particular — remains the global hot spot for retail construction. More than 90% of APAC cities studied by CBRE hosted large-scale retail construction in 2016 compared to 56% of cities in the Americas and 14% in Europe, the Middle East and Africa (EMEA). Of retail construction completed in 2016, APAC accounted for two-thirds.
However, even APAC and China appear to be taking a breather. The APAC pipeline of retail centers under construction was down 24% at the end of 2016 from a year earlier. China’s completion of nearly 62 million sq. ft. (5.75 square meters) of retail centers last year was down slightly from the previous year, and half of Chinese malls that opened last year delayed their debuts by at least six months due to sluggish leasing progress.
“The Chinese retail market is showing some signs of recovery,” says Joel Stephen, CBRE Senior Director, Advisory & Transactions, Retail Asia. “There are short-term oversupply concerns in some markets and submarkets, although others remain buoyant. Retail markets are thriving across APAC, with strong demand supporting construction in markets like Melbourne, Brisbane, Kuala Lumpur, and Ho Chi Minh City.”
In EMEA, retail construction was relatively calm, increasing by 18% last year but still trailing APAC and the Americas. Big retail centers came online in Moscow, South Africa and Kyiv in the Ukraine.
Across the globe, developers completed more retail centers last year than in 2015. But momentum appeared to wane in many countries as retailers strive to find the right balance of brick and mortar and e-commerce operations, according to the Global Shopping Centre Development study.
“In the omnichannel era, retailers are focused on ensuring that they have the optimal mix of brick-and-mortar stores and e-commerce operations, so they are using sophisticated analytics and market knowledge to choose the best store sites rather than the most store sites,” says Anthony Buono, chairman of CBRE’s Global Retail Executive Committee. “At the same time, an easing of construction volumes likely will benefit retail center owners by supporting rental rates.”