The current year is shaping up as a difficult one for store development and construction as the economic downturn forces retailers to cut back on expansion. In a bit of good news, the cost of fixtures, lighting and other store-outfitting systems is down from last year. These are some of the findings in
The exclusive survey was conducted by Leo J. Shapiro & Associates, Chicago, which compiled results from chains across the nation. The study examined such items as expansion and remodel plans, construction costs, store size, energy costs, and trends in store-outfitting and support systems such as lighting, fixtures, and heating, ventilation and air-conditioning.
This year, the chains that participated in the survey were grouped into five different segments: convenience stores, supermarkets, home centers, specialty apparel and big-box stores (includes department stores). The convenience store group included 7-Eleven, Circle K stores and Stewart’s Shops. The supermarket category included Kroger, Roche Bros. and Smiths.
National Lumber Co., The Home Depot and The Andersons were among the home centers. Specialty apparel retailers included Jos. A. Bank, Claire’s and Kenneth Cole. The big-box segment included Federated Department Stores, REI, J.C. Penney and Kohl’s.
Overall, the survey polled retailers whose stores produced combined total revenues of $176.6 billion last year. Although the chains that participate in the survey vary year to year, the results can be taken to suggest general trends within the industry.
Expansion: For all retailers surveyed, the average number of store openings planned for 2009 was 13 (per chain) versus 14 in 2008. (All comparisons regarding expansion plans are based on information collected in this year’s survey).
Looking at the individual sectors, convenience stores said they plan to open an average of 19 stores (per chain) in 2009, up from 13 in 2008. Big-box stores plan to open 13, down from 15 last year, while supermarkets plan to open 10, up from eight. Home centers plan to open 10, down from 13.
The biggest decline in new-store growth was reported by specialty stores, which said they plan to open an average of 14 stores in 2009 as compared with 21 in 2008.
The planned expansion ratio (new stores planned as a percentage of stores currently in operation) averaged 3% for all retailers surveyed, down from 4.5% in last year’s survey. Convenience stores, at 3.7%, had the greatest expansion rate.
Looking at expansion in a slightly different way, 67.7% of all retailers surveyed reported they plan to cut back on new construction in 2009. Among the top reasons cited: the economy (40.3%), sales declines (14.5%) and cost (14.5%).
With discretionary spending still lackluster at best, it’s not surprising that of the retail categories surveyed, the biggest cutback in expansion was reported by specialty apparel stores, with 84.6% of respondents scaling back. By contrast, only 50% of convenience stores and 58.3% of home centers said they were scaling back expansion.
The downturn has also affected remodeling plans, but to a lesser degree than new construction. Of all retailers surveyed, 50% said they were pulling back on remodeling or retrofitting initiatives. Once again, convenience stores appear least affected, with 62.5% reporting they were not planning to scale back. In the big-box segment, 52.9% said they did not plan to cut back; 50% of supermarkets also report no change. Even specialty apparel stores continue to remodel, with 46.2% reporting no change in plans.
Costs: Construction costs were divided into two separate categories: building-shell construction costs for freestanding locations, and tenant fit-out costs for stores in malls and other types of centers.
In the freestanding category, construction costs (includes concrete, structural steel, structural masonry, roof and HVAC but excludes interior fit-out) averaged $40.77 per sq. ft. for all retailers surveyed, compared with $42.63 per sq. ft. in last year’s survey.
Specialty apparel retailers had the highest building costs, at $55.00 per sq. ft., followed by convenience stores at $51.14 per sq. ft.
Big-box stores averaged $40.00 per sq. ft., and home centers averaged $32.00 per sq. ft. Supermarkets had the lowest costs, at $31.00 per sq. ft.
Costs for tenant fit-out work (includes dry wall, ceiling, floor, wall finishes and exterior construction but not fixture package) averaged $40.59 per sq. ft. for all retailers surveyed, compared with $39.27 per sq. ft. last year. Convenience stores had the highest costs, $55.00 per sq. ft. followed by specialty apparel, at $43.59, and big-box stores, which averaged $40.96 per sq. ft.
Supermarkets averaged $39.00 per sq. ft. Home centers enjoyed the lowest costs, at $13.50 per sq. ft.
Store size: The size of new stores (defined as stores opened during the past 12 months) on average was down compared with the size of existing units. For all retailers surveyed, new stores averaged 36,000 gross sq. ft. versus 38,911 gross sq. ft. for existing units.
The smaller footprint was driven largely by big-box retailers, where new outlets averaged 56,250 gross sq. ft. compared with 66,029 gross sq. ft. for existing units, and specialty apparel stores, where new stores averaged 6,154 sq. ft. versus 8,654 sq. ft. for existing stores.
Outfitting costs: For all retailers surveyed, store-outfitting costs were down across the board when compared with last year’s results. Display fixtures retained their longstanding status as the most expensive category, averaging $7.65 per sq. ft. for all retailers surveyed.
Flooring was the second most costly store-outfitting category, averaging $2.78 per sq. ft. for all retailers surveyed. It was followed by roofing, at $2.68 per sq. ft., and interior lighting, at $2.54 per sq. ft.
HVAC averaged $1.63 per sq. ft., and ceilings averaged $1.50 per sq. ft. The least expensive categories were exterior signage, at $1.18 per sq. ft.; interior signage, at $0.66 per sq. ft.; and floor maintenance, $0.36 per sq. ft.
For a breakdown of store-outfitting costs by individual retail category, and for more information on the types of systems used, see
Energy: Energy costs averaged $1.94 per sq. ft. for all chains surveyed. The supermarket sector, which has been at the fore-front of energy conservation in the past several years, came in below average, at $1.75.
Energy expenditures were highest for specialty stores, at $2.25 per sq. ft., followed by big-box stores at $2.11, and home centers at $1.87. Costs were lowest for convenience stores, at $1.55.
Green: The economic downturn has not diminished retailers’ interest in building green. For all chains surveyed, 77.4% reported using environmentally friendly materials in their most recent construction projects, with another 14.5% planning to do so in the future.
The use of green materials was not as strong in the convenience store sector as it was in the other retail categories. Of the convenience chains surveyed, 75% reported they were using green materials or planned to in the future, compared with 100% of supermarkets, 94.1% of big-box retailers, 92.3% of specialty apparel chains, and 91.7% of home centers.