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RESEARCH REVEALS SURPRISING STATS ABOUT THE U.S. SHOPPING CENTER INDUSTRY

By Dees Stribling

The U.S. shopping center industry is so staggerINGLY large and its economic impact so vast that numbers barely do it justice — unless there is some context. The aggregate size of U.S. shopping centers, for instance, is about 6.85 billion square feet, which amounts to roughly 245 square miles, or four times the size of the District of Columbia and one-sixth the size of Rhode Island.

As for economic impact, Americans spent $2.25 trillion at shopping centers last year, which is about equal to the gross domestic product of Germany. Moreover, U.S. shopping centers were employing some 12.6 million people at the end of 2006. Together, that many workers could form a state edging out Pennsylvania as the sixth-most populous state in the union.These superlative figures and much more have been published in a new ICSC report titled The U.S. Shopping Center Industry: Size, Shape and Impact. The report, co-authored by Michael P. Niemira, who is ICSC’s director of research and chief economist, and Jay Spivey, senior director of product management at CoStar Group, represents a sea change in the methodology used to track the size, scope and impact of shopping centers.

In 2005 CoStar acquired the National Research Bureau database from Claritas, then reworked and expanded the tool before unveiling it at the 2006 Spring Convention.

Previously, NRB had extrapolated the number of smaller shopping centers (those measuring under 30,000 square feet) based on the database count of larger properties. ICSC had then used that figure for years to describe the size and scope of the industry. CoStar changed this methodology to one relying on the identification of actual properties, and the results were astonishing. Last year there were 90,786 shopping centers in the U.S., about twice the number previously held. Deep cross-checking against new construction data collected and reported by McGraw Hill Construction confirmed the new figures.

Though the study’s hallmark finding is that the shopping center industry is much larger than previously believed, another discovery was that the industry is dominated by shopping centers that are smaller than 100,000 square feet and not by regional malls or other mega-properties.

Unsurprisingly, the number of shopping centers measuring less than 100,000 square feet is very large, making up 83 percent of the total, or 72,904, last year. But small centers also represent the largest amount of retail space in square footage terms, roughly 2.1 billion square feet, or some 32 percent of the U.S. total of 6.85 billion square feet. Centers measuring between 100,000 and 200,000 square feet make up the next largest slice of the pie, at 21.9 percent. Thus over half the shopping centers in the U.S. measure less than 200,000 square feet, suggesting that smaller centers — typically grocery-anchored but also drugstore- and even convenience-store-anchored ones — are so ubiquitous as to be fully woven into the fabric of everyday life.

“Our first goal is to assemble a strong amount of what we call convenient-sized centers, which are grocery-anchored and drug-store anchored,” said Mark Zalatoris, COO of Inland Real Estate Corp., a retail REIT that owns about 110 shopping centers, totaling some 14 million square feet. Larger centers have their place, to be sure (his firm owns power and lifestyle centers too), but the utility of smaller centers makes them virtually irreplaceable in modern life, he says.

“These kinds of centers will always be able to withstand economic swings,” said Zalatoris. “After all, people need to go to grocery and drugstores no matter what.”

Shopping centers measuring over 1 million square feet, though highly visible, are only a small minority in numerical terms. There are 523 of these, though this small number represents 10.5 percent of all U.S. shopping center space.

Geographically, shopping centers are well concentrated, the report says. Just five states — California, Florida, Illinois, New York and Texas — account for 37 percent of all the shopping center space and generate 36 percent of all the shopping center revenues in the country. Broadly speaking, this concentration matches the population density in these states, which are the country’s five largest. And the pattern holds even at the low end of the state population roster: Alaska has more shopping center space than Wyoming, just as it has a greater number of people, albeit more spread out.

The report also describes the health of the shopping center industry. Based on ICSC estimates, that $2.25 trillion ($329 per square foot) in retail sales the U.S. shopping center industry generated last year represents a 6.4 percent increase over the previous year and the strongest annual gain since 1999 (6.9 percent). In fact, the long-term yearly growth between 1993 and 2006 was a more modest 5.1 percent on average; from 2004 to 2006, annual growth was higher than that 5.1 percent average.

“There are certainly individual properties that have problems, perhaps because their trade area changes, but shopping centers, as broadly defined, are fundamentally strong,” said Mary Brett Whitfield, senior vice president of Columbus, Ohio – based consulting firm Retail Forward. “The types of centers might change over the coming years, but I don’t think that shopping centers will ­ever be anything less than central to the retail industry.”

The report affirms that shopping centers are a pillar of the U.S. economy. Those 12.6 million shopping center employees represent nearly a tenth of the nonfarm civilian work force, but the industry’s impact is deeper than that. Shopping centers account for fully 56 percent of the sales tax revenue raised by the states, some $124 billion in total last year.

How is that possible? It is because in 2006, consumers spent on average $7,528 each at shopping centers, about a quarter of their disposable income. Mail order and the Internet may offer alternative modes of shopping, but they are still relatively small potatoes compared to shopping centers. Whitfield says Internet sales account for about 2.5 percent of all retail sales.

Clearly, the mighty shopping center is still the king of retail.