Construction spending for shopping centers and shopping malls is down more than 40% from a year ago, about a 10% deeper decline than for other retail facilities. Project starts data also shows a relatively deeper decline for shopping centers and malls than for other retailing.

Overall, little further decline is expected for retail construction in this building recession but shopping centers and malls will lag stand alone retail facilities in the retail construction recovery. The types of stores that operate principally from shopping centers and especially shopping malls are suffering larger sales declines than other retailers.

Retail spending increased 2.7% in August but only 0.6% excluding auto dealers and gas stations. Still, the 0.6% is a sizable gain for retail stores. It probably signals the beginning of a slow but progressive recovery in consumer spending that will lead to a recovery in retail construction early next year. Expect the recovery to lag at least several months for shopping centers and shopping malls.

The table shows sales volume changes over the past year for 35 types of retailers. Note that the fifteen types of retailers with the best sales results over the last year are typically not located at shopping malls and infrequently at smaller shopping centers. The consequence is that these retailers most likely to need (and be able to finance) added space will be looking for non-center and non-mall space although they lease vacant center or mall space is the rent is discounted enough.

The best performing large retail category (real sales off 0.2%) is “other general merchandise stores” which is dominated by big box discounters who prefer stand alone facilities. This category spends much less per square foot on construction than retailer who generally locate in large shopping malls.

The key retailers in shopping malls are department stores with real sales down 10.4% in the last year, home furnishings with a 14.9% sales decline, jewelry/luggage/leather stores with an 11.3% sales decline, shoe stores with an 8.8% sales drop and clothing stores with a 6.7% fall in sales volume. The financial position of these stores is also being stressed by the forced lending cutback at CIT, the dominant financier of retail inventories.

The typical tenants of smaller shopping center recorded better sales results over the last year. This includes the anchor grocery stores (-1.3%), health and personal care stores (+1.3%) and beer, wine and liquor stores (-3.7%).