Cost Control Is Still Key
Retailers generally held the line on store development and construction costs in 2006, even in the face of rising expenditures for physical-supports systems, according to Chain Store Age’s 2007 Physical-Supports Census, an annual survey of retail building activity. The survey also indicated rising concern about energy costs and increased interest in environmentally friendly materials.
The exclusive survey was conducted by Leo. J. Shapiro & Associates, Chicago, which compiled results from chains across the nation. The study examined such items as construction costs, store size, expansion plans, construction time, energy costs, and expenditures and trends in physical supports.
The retailers that participated in the survey were grouped by segment: drug stores, supermarkets, department stores, home centers, specialty apparel, big-box stores and, new this year, specialty hard line. The specialty-apparel retailers in the survey included Pacific Sunwear of California, Rainbow Apparel, Cato Corp., Claire’s Stores and Wilson’s Leather. Chains such as J.C. Penney, Mervyn’s, Saks and The Bon-Ton Stores represented the department store category.
Big-box stores included Minyards, Price Chopper, Safeway, Aldi, King Soopers and Giant Food. Orchard Supply Hardware, Home Valu, Ace Hardware Corp. and United Building Centers were among the surveyed home centers.
The specialty hard lines category included Restoration Hardware, Kirklands, Williams-Sonoma, Eastern Mountain Sports and Blockbuster. Walgreen Co., Drug Fair Group, Lewis Drug Stores and Kinney Drugs were among the drug store retailers.
The companies that participate in the survey vary from year to year. But the results can be taken to suggest general trends within the industry. Overall, they operate 31,797 stores, with sales exceeding $268 billion. They opened 1,517 stores last year, remodeled 1,603 and expect to open 1,823 over the next 12 months.
Store size: The size of new stores (defined as stores opened during the past 12 months) on average was down slightly compared to the size of existing units. For all retailers surveyed, the average new store opened totaled 41,929 gross sq. ft. compared to 42,263 sq. ft. for existing units.
The smaller footprint was driven largely by two classes of trade: home centers, where new outlets averaged 32,250 sq. ft. compared to 43,750 sq. ft. for existing units, and specialty apparel, where new stores averaged 11,477 sq. ft. vs. 17,159 sq. ft. Specialty hard lines were flat, at 13,333 sq. ft.
Company Expansion| All stores 2007 | Drug store 2007 | Supermarket 2007 | Department store 2007 | Home center 2007 | Specialty apparel 2007 | Big-box store 2007 | Hard lines specialty 2007 | |
| Stores in operation during 2006 | 331 | 278 | 253 | 403 | 312 | 452 | 223 | 465 |
| … New stores opened In 2006 | 16 | 10 | 5 | 13 | 12 | 32 | 15 | 15 |
| … Stores remodeled In 2006 | 17 | 13 | 16 | 19 | 19 | 21 | 8 | 22 |
| … Years before a store is remodeled | 7.8 | 9.6 | 7.4 | 8.0 | 8.8 | 7.1 | 7.2 | 7.8 |
| … New stores plan to open in 2007 | 19 | 12 | 9 | 15 | 19 | 34 | 18 | 17 |
| (New stores planned as a percentage of stores currently in operation) | 5.7% | 4.2% | 3.5% | 3.7% | 6.0% | 7.4% | 8.0% | 3.7% |
| (Mean days to complete) | ||||||||
| … Shell construction | 81 | 76 | 80 | 93 | 71 | 68 | 86 | 106 |
| … Inside preparation | 71 | 45 | 84 | 97 | 68 | 60 | 68 | 69 |
| Total new store preparation time | 152 | 121 | 164 | 190 | 140 | 128 | 154 | 175 |
Other categories, however, built larger. New footprints for drug stores averaged 14,063 sq. ft. compared to 10,625 sq. ft. for existing units. Supermarkets averaged 64,286 sq. ft. vs. 62,045 sq. ft.
Big-box stores averaged 56,250 sq. ft. compared to 52,656 sq. ft. And department stores also went bigger, with an average new footprint of 93,333 sq. ft. compared to 82,222 sq. ft. for existing stores.
Expansion: The average number of new stores planned by all retailers surveyed was 19 (per chain). The number of new stores retailers planned to open in 2007 was up in supermarket, department store, specialty apparel and home centers, compared to planned openings in 2006.
The planned expansion ratio (defined as new stores planned as a percentage of stores currently in operation) averaged 5.7% for all retailers surveyed, up slightly from last year. Big-box stores, at 8.0%, and specialty apparel, at 7.4%, had the fastest expansion rates, followed by home centers, at 6.0%.
The rate of planned expansion for drug stores was 4.2%, followed by department stores and specialty hard lines, both at 3.7%. Supermarkets were on the low end, at 3.5%.
Construction costs: Building costs were divided into two separate categories: building-shell construction costs for free-standing locations, and tenant fit-out costs for stores in malls and mixed-use centers. Costs are for locations opened during the past 12 months or under construction. On average, building-shell costs as well as tenant fit-out costs were down compared to last year.
In the freestanding category, building-shell construction costs (includes concrete, structural steel, structural masonry, roof and heating, ventilation and air conditioning, but excludes interior fit-out) averaged $41.30 per square foot for retailers surveyed. Department stores, specialty hard lines and specia