The combination of increased construction costs along with the prospect of slowing sales growth has led some retailers to pull out of planned shopping center projects. Others that continue to look for new locations are being more cautious before committing to undertake store construction, according to a report on The Dallas Morning News website.
Two store sites approved for Home Depot stores have been canceled as the chain is going through what Hunter Stansbury, senior real estate manager for the chain, called a "cooling-down period."
John Weber Sr., president of Weber and Co., told an audience at an International Council of Shopping Centers event that commodity prices, not labor, have driven project costs up 20 to 25 percent so far this year.
While others have backed off construction projects, crafts retailer Michaels Stores is planning to open 45 locations this year, roughly the same number it has opened each of the last 10 years. Even so, Karen Slayton, real estate manager for the chain, said the company is proceeding with caution in choosing new locations this year. "We're all expecting you to bring deals to us for 2010," she said.
J.C. Penney real estate negotiator Viral Patel said the company is looking to delay any projects "if the growth isn't going to be there." The department store chain scaled back its plans for 50 new stores in 2008 to 36.
Discussion Question: Which factor - construction costs, availability of credit, prime locations, projected (slow) revenues, etc. - is most important in the decision by retailers to put off new store projects? What repercussions in the retailing industry do you expect from the increased availability of space?