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Shopping Centers Today -> May 2004
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UNSUNG STRIP CENTERS ARE INDUSTRY’S BACKBONE
Say the words “shopping center,” and most Americans think of the nearest regional or super-regional mall. For many, neighborhood strip centers don’t come to mind — these centers are so well established and so ubiquitous that they’ve become just part of the landscape along the way to the mall.
But strips, in their various guises as neighborhood, community, power or lifestyle centers, account for 97 percent of the country’s more than 45,000 shopping centers. Most are small neighborhood centers or slightly larger community centers.
Because shopping centers didn’t really grow to mammoth proportions until after World War II, the early history of shopping centers is the story of small neighborhood centers.
In the 1920s investors and retailers began building strip centers along roads at the outskirts of town for people driving cars. Parking could be at the curb and in the rear or, if the centers were set back from the road, in lots built in front of the stores. The Great Depression and then the shortages of World War II slowed the spread of these centers.
When U.S. soldiers and sailors returned home, they began buying houses in the suburbs. Supermarkets sprang up to serve them, and other retailers began setting up shop alongside to create strip centers. By 1950, shopping centers numbered about 100 in the United States, according to the 2002 book America’s Marketplace: The History of Shopping Centers by Nancy E. Cohen. That had grown to 11,000 by 1970.
About the early 1980s, 22,000 shopping centers were operating in the United States, Cohen wrote. At the end of the decade, the number had grown by nearly 65 percent to 36,000. Most were neighborhood centers of less than 100,000 square feet, accounting for about 85 percent of new construction. Malls fell from 5 percent of construction starts at the beginning of the decade to 1 percent by the end.
Two decisions by the federal government fed runaway growth of new strip centers. First, accelerated depreciation created tax shelters that attracted investment. And second, the savings and loan industry was deregulated, loosening requirements in a competitive credit market.
When the S&Ls failed and the flood of capital ended in the late 1980s, shopping center construction plummeted 70 percent. Strip center companies were among the first developers to begin going public by converting their companies into REITs to raise money in the tight credit environment of the early 1990s.
Before and after going public, some strip center companies have grown prodigiously over the long haul. New Hyde Park, N. Y.-based Kimco Realty Corp., formed in 1960 by Milton Cooper and Martin Kimmel, now operates 700 properties in 40 states and Canada. Kimco went public in 1991, starting the modern REIT movement.
New York City-based New Plan Excel Realty Trust (formed by the merger of New Plan and Excel in 1999) traces its roots to 1942, when founder Morris B. Newman pursued his “new plan” of syndication, which pooled the savings of small investors to buy large properties. The company now owns 400 properties in 35 states, with a total value of $3.6 billion.
Weingarten Realty Investors began in 1948 as a supermarket chain called Weingarten’s; it evolved into a Houston-based real estate development company specializing in strip centers. Having started with a portfolio containing 51,000 square feet, the firm owns 38 million square feet today.
Despite the size and success of those companies, their centers are small and thus escape notice. For most Americans, small neighborhood strip centers will continue to hide in plain sight.
— EM
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