There is no denying that the fallout from this Recession has been widespread. Even companies experiencing a level of success are being affected by the financial issues of others.
Here’s an example. Hennes & Mauritz is a Swedish-based fashion retailer that appeals to teens and young adults. My daughters love their stores, and apparently they’re not alone. H&M reported a 23 percent increase in profits for the third quarter of this year, with earnings of $627.5 million.
That sort of growth inevitably leads to expansion. And indeed, H&M said it is on pace to open 220 stores this year, adding to its total of approximately 2,000 stores across 37 countries. That sounds great, right? Not when you consider that the retailer originally planned to open many more stores.
Why the decrease amid such strong profits and earnings? Fewer commercial properties are being built, and H&M hasn’t been able to find enough prime locations for new stores. From what we are seeing, the best vacated box stores have already been absorbed (or are being absorbed) and developers simply aren’t building many new ones right now.
To me, it’s somewhat of a face-off between what lenders and developers need on ROI and what the tenants are willing to pay. The result has definitely slowed the pace of property development. But, as there are more and more companies like H&M clamoring for new buildings, demand increases. Perhaps this is the first step towards an upswing in retail construction? We’d like to think so.