06/26/2015 | by
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Green Street Analyst Seeing Limited Strip Center Development

Jason White, equity research analyst at Green Street Advisors, joined REIT.com for a video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

White offered perspective into why growth in the strip center segment is looking constrained relative to other real estate sectors. He noted that the last housing cycle was characterized by the rapid supply of new homes at the edges of communities. Strip center developers would typically follow these developments and build their centers near those new homes, or sometimes even beyond them, according to White. Strip centers began to struggle once the recession hit and these new housing developments failed to attract buyers, White said.

The situation today is one of limited supply growth in single family housing, which in turn has curtailed strip center development, he noted.

The limited development currently in progress is focusing mainly on inner and suburban cores with established population density and neighborhoods that are gentrifying, White said.

Developers are also adding different components to their strip centers, such as residential and office space, because the cost basis of the land is so much higher, White said.

There will definitely be an increase in mixed-use strip center development going forward, according to White. However, supply growth will be constrained overall because municipalities aren’t on board with extensive new developments, which is creating a protracted approval process, White added.