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New shopping centers drop due to bank credit policy.

New shopping centers drop due to bank credit policy

Banks tightening of available credit caused much of a 33 percent decline in shopping center construction starts in the United States last year, according to the International Council of Shopping Centers (ICSC).

The decline also accounted for a decrease in shopping center construction employment -- 95,600 in 1990 as compared to 123,000 in 1989, and in contract awards, down to $5.8 billion from $7.4 billion one year earlier. ICSC reported that the decline in shopping center construction starts began months before the onset of the current economic recession.

According to ICSC, there were 36,650 shopping centers in the United States at the end of 1990. They generated $723.3 billion in retail sales in 1990, an all-time high, accounting for 56 percent of all non-automotive retail sales, an increase of nearly a full percent over 1989. Each month, ICSC said, 94 percent of adult shoppers -- 174 million of them -- visit U.S. shopping centers.

Despite continuing consumer preference for shopping in centers in 1990, however, developers faced unprecedented difficulty in securing credit for new construction, ICSC said.

According to ICSC spokesman Don Pendley, even shopping center development companies with flawless credit histories are finding credit terms being re-defined mid-loan, funds being withdrawn mid-construction and banks demanding larger equity positions in new centers than ever before.

The "credit crunch," which many feel results from inappropriate reaction of bank regulators to the savings and-loan crisis, may have eliminated as much as $7 billion from shopping centers' contribution to the national economy in 1990, ICSC said, considering lost construction jobs and purchases and a portion of retail sales and employment.

While construction starts on new centers nationwide fell 33 percent from 1989 levels, ICSC reported the highest increase ever in shopping center renovations and expansions -- up 35 percent from a year prior.

Over 10.1 million people work in U.S. shopping centers, ICSC reported. The nation's shopping centers generated $28.5 billion in state sales taxes last year.
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Real Estate Weekly
Date:Jul 10, 1991
Words:339
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