Skip to content

Less extravagant shopping malls being completed by US developers

Despite the worst retail climate in decades a number of shopping developments are opening this year but they are toned down and less flamboyant than initially envisioned.

Real estate developers are expected to complete more than 78 million square feet of new retail space in the top 54 US markets, according to real-estate-research company Property & Portfolio Research.

While that is down from the 144 million square feet completed last year, the peak number this decade, the amount expected this year could be more than the market can absorb in its second year of a recession, some analysts are warning.

The 2009 opening include a number of shopping developments that were started years ago when developers were fashioning grandiose projects. And while the economic climate has since changed because it can take years to get a project from conception to completion projects that sounded like a great idea a few years ago are fast becoming problematic for developers.

And while developers are scaling back and delaying projects, in many cases they are obligated to proceed with at least the first phase.

'When you've already broken ground and taken on construction loans it's in your interest as a developer to get the project done soon and turn it into an income-generating asset to pay off your loan,' said Victor Calanog, director of research for real-estate-research company Reis.

An example is the Park Lane project in Dallas. Developers Harvest Partners envisioned in 2003 a mixed-use development that would blend name brand stores such as Gap's Old Navy with an upscale hotel, high-end office space and upscale apartments and to open in 2008. Last week it opened the $460 million first phase with only a handful of retailers, its 100,000 square feet of offices half full and only a third of its 325 unit apartment tower leased.

In Atlanta, developer Ben Carter Properties recently pushed back the debut of the $650 million first phase of its Streets of Buckhead luxury mixed-use project until the autumn of 2010 from this November to negotiate lower construction prices and to allow retailers more time. Half of the project's retail space is leased with tenants, including luxury stores Hermès and Bruno Cucinelli. One tenant is stalled in bankruptcy proceedings and another has asked out of its lease.

In Chicago, developer Joseph Freed and Associates has delayed completion of the first phase of its Block 37 mixed-use project, spanning 285,000 square feet of shops. Due to open this spring, it is now hoped it will open before the end of the year.