Retail growth points to cities as housing starts fall
In the 1970s, the average age of Americans at their first marriages was 21 for women and 23 for men. Today those ages are 27 and 29, respectively. There’s a direct correlation, according to CoStar strategist Suzanne Mulvee, between those increasing numbers and the declining sales per square foot numbers at suburban malls.
“We’ve got more people doing things later in life. The trend has been pretty constant and the economic crisis will continue to drive it up,” says Mulvee, who consults for companies such as CBRE, JLL, and Cushman & Wakefield.
Average household incomes of Millennials haven’t risen on a comparative basis since 2000, while the lack of starter homes in the marketplace is forcing young adults to seek out small apartments in the city or shelter at home with mom and dad.
Housing starts fell by 3.7% in April, according to a report issued today by the Commerce Department, and building permits fell 1.8%. Single family home construction edged up 0.1% in the month to 894,000 units, but that’s a far cry from the nearly million-unit-a-month rate that had been established at the end of 2017.
Retailers, meanwhile, are faced with new strategic challenges with brick-and-mortar stores.
“It’s a totally different scenario than in the Eighties or Nineties when it was, ‘Let’s expand with more stores and be able to leverage ad dollars to build our brand,’” Mulvee said. “So many markets are oversaturated with retail and you have to take rifle shots to find markets for expansion.”
Urban markets are the first place retailers should look for productive, brand-enhancing locations, she advised.
“There’s an incredible imbalance between urban and suburban locations. Sales per square foot are up 23% in urban areas and down 12% in suburban areas,” Mulvee said.