Commercial Real Estate, Capital, Insurance, Leasing & Management

Ask the Expert: How Are Construction Supply Shortages and Inflation Impacting Retail Real Estate?

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The pipeline for new retail development here in Florida is extremely robust due to pent up demand following the COVID-19 pandemic. However, current supply and demand discrepancies in the commodities market are creating challenges for builders, as well as retailers looking to expand.

First, widespread supply shortages are causing major delays in the delivery of essential building materials such as lumber, steel, copper and cement. These delays are expected to drag out construction timelines for at least another nine to twelve months, impeding expansion plans and openings for retailers. Inflated commodity pricing is also leading to increased construction costs, driving retail owners and landlords to push asking rental rents higher in order to recover some of the costs.

In some cases, occupiers are opting to retrofit existing spaces instead of building new to save money and time. Certain types of retailers, such as Quick Service Restaurants (QSRs), are turning to alternative building materials – like metal gauge framing instead of cement – to get projects to the finish line faster.

Whether you’re an owner or occupier, flexibility will be key to navigating retail real estate over the next year. Having a reliable construction team who can maximize your efficiencies is crucial to making larger-scale deals work.

Alex Wright, Senior Director, Retail Landlord Representation

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