The retail shopping center provides an excellent introduction to commercial income-producing property. Retail property management requires more knowledge about tenants’ businesses than does management of any other commercial income-producing property; often the income from the property is directly related to the success of the tenants’ businesses.

Shopping center properties are relatively easy to classified by size and retail market orientation. Once the property has been classified, the analyst can identify the tenant mix, physical requirements, and operating characteristics of each type of property. To evaluate a shopping center property, however, real estate lenders need to understand the concepts behind the design and location of shopping centers.

A tremendous growth in the number of shopping centers and in the volume of retail sales in these centers has accompanied the increase in population and affluence of Americans and the migration of that affluent population to the suburbs. In the remainder of the twentieth century, two major forces affected retailing and, therefore, shopping centers. Demographers expected a significant shift in population, housing, and retail sales from the industrialized Northeast and central United States to the growing technological centers in the South and West. Shopping center growth expected to follow traditional population- driven patterns in these areas. The second force was the continued growth of discount retailers and the slow, and certainly not full, recovery of traditional full-service retailers.

During the 1980s retailers such as Federated Department Stores and Macy’s, venerable names in full-service retailing, went through leveraged buyouts. Amassing huge debt loads, they were unable to weather the economic recession of the late 1980s and early 1990s and filed for bankruptcy. Even those traditional retailers with strong balance sheets and established names, such as Sears and J.C. Penney’s, were damaged by the recession’s slow sales and the emergence of the new giants of retailing, the discounters.

By the late I 980s, Wal-Mart from Bentonville, Arkansas, had surpassed all others to become the largest retailer in the United States. K-Mart, another discounter, continued its successes in following the growth in suburban areas of larger cities while Wal-Mart concentrated on smaller towns and cities. The impact of these new retailing giants on the shopping center industry was and will continue to be significant. The net growth of shopping centers may slow as population changes reflect shifts rather than real growth; however, the shopping center concept will remain strong.

This tremendous growth was stimulated to a certain extent by population growth, but the main factor was the movement of consumers, followed by retailers, from the city to the suburbs. Despite the temporary slowdown caused by problems in the energy industry in the early 1980s and the general economic slowdown of the late 1980s, a general migration continues to the South and West. People moving to these areas will continue to need housing, and shopping facilities will continue to follow in patterns similar to those established over the past few decades.