r.e. Redevelopment: Economic uncertainty, emerging opportunity and an evolving redevelopment landscape

March 15, 2023

REJournals
By: Josh Poag

After a year when economic headwinds sapped some of the momentum from the commercial real estate market, the prospect of lingering inflation, challenging market dynamics and a potential recessionary cycle have all injected additional uncertainty into an industry that has been, at least until recently, enjoying a post-pandemic surge in activity.

Rising interest rates make getting a high-enough return on equity a more difficult proposition, an occurrence that has simply priced most retail development projects out of the market. Consequently, new ground-up retail development is in increasingly short supply. Considering construction cost spikes, and the fact that residential and industrial projects have been soaking up a sizable percentage of an already scarce and expensive skilled labor supply, it’s not hard to see why development pipelines have slowed significantly.

All of which makes retail redevelopment one of the most interesting—and potentially among the most important—features on the commercial real estate landscape. The retail redevelopment space is not immune to some of the factors that have complicated matters in other areas of the commercial real estate industry, but redevelopment comes with its own unique set of challenges and opportunities. However, the need for redevelopment due to dated properties that need a new vision is growing quickly

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