Business of Design

This Is Why Retail Chains Are Reducing Construction Spending

U.S. retailers have decreased construction spending, moving away from brick-and-mortar, which has been ongoing for years but accelerated amid the pandemic.

The Download: According to Dodge Data & Analytics 2021 Construction Outlook, U.S. retailers are decreasing construction spending—a concerning prospect given that it’s a primary indicator of financial prosperity. It proves how the pandemic is exacerbating an ongoing trend: the demise of brick-and-mortar retail.

The Outlook: In an analysis of ten retail chains that spent the most on construction, seven decreased spending in the first nine months of 2020 compared to 2019. Meanwhile, only three of those ten—AutoZone, Publix, and Dollar Tree—increased construction spending. In total, the top ten chains have reduced spending by 15 percent, amounting to $1.876 billion. Meanwhile, early data from Adobe Analytics predicts that online sales from last week’s Black Friday ballooned to $10.6 billion, a 42 percent increase year-over-year.

In Their Own Words: “If this sea change in consumer behavior becomes a permanent phenomenon, the long-lasting effects of Covid-19 could mean further deterioration in retail construction starts in coming years,” the report reads. “Since 2016, retailers have only tentatively expanded their footprints, but have instead focused on updating and improving existing facilities to remain competitive. With online shopping making further inroads and the economy on unsure footing, this is unlikely to change over the next few years.”

Surface Says: Covid-19 may very well be sounding the death knell for brick-and-mortar retail, which we already witnessed when Amazon began transforming department stores in abandoned shopping malls into fulfillment centers.

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