Neither boom nor gloom for retail building

August 11, 2010

The good news is that retail construction spending grew over the first five months of this year compared with the same time frame in 2000. The bad news is that the growth was less than during the same period in 2000.

Through the first five months of this year, an estimated $24.7 billion was spent in the retail building sector for new construction and remodeling, renovation and retrofit. This total was 5.6 percent greater than during January through May of 2000, but less growth than the 8 percent increase in construction spending recorded for the year.

The supply-demand fundamentals of this market sector argue for further pullback in development during the months and years ahead. But, given a longer-term perspective, it should be noted that retail construction spending growth has moderated considerably during the past three years.

Following the 1990-1991 recession, construction spending for retail buildings grew at an average annual rate of 13.4 percent over the 1993-1996 period. But gains during the 1997-1999 period averaged a modest 5.7 percent a year.

So, the 2001 year-to-date growth rate doesn't paint the picture of a boom market, especially on the heels of last year's healthy gain. The absolute declines in retail construction spending that many market analysts had expected have not materialized.

         
 

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