Puerto Rico is lacking one fundamental element necessary for the retail industry to grow and welcome new players: move-in ready spaces large enough to fit the “big box” chains, Michael Kercheval, president of the International Council of Shopping Centers Inc. told News is my Business Monday.
Kercheval, in town for the trade group’s two-day annual conference being held at the Puerto Rico Convention Center, said the island already benefits from two key drivers for a prosperous retail sector — sales volumes and demand from retailers.
“Many retailers, like Target and other big stores, are doing their research on Puerto Rico. The reason I think they have not come is that they cannot build, and that has been the biggest stumbling block,” said Kercheval.
In recent years, the only significant construction of new retail space has come from a scant few individual retailers who have opted to create their own space, for example, Walmart. Two major shopping centers planned for San Juan and Guaynabo are stuck in protracted court procedures that have held back the arrival of the likes of Nordstrom’s and Sachs Fifth Avenue to island shores.
To address the issue of creating more large-scale commercial space, which averages between 16,000 to 20,000 square feet, Kercheval suggested the government take action by “being more realistic and more pragmatic about looking at how they can encourage smart development in Puerto Rico.”
“The demand from the retailers is there, because of the high sales, and the demand from the shoppers is here. The only thing is the developers cannot find is store space,” he said. “If you want to create jobs when you’re in a recession you turn to construction, retail and hospitality. Our industry drives all three of them.”
Kercheval, who delivered the ICSC’s annual retail industry update, said despite the stressed economic conditions the island has been under in the last five years, retailers have not suffered.
“There’s good news and bad news that have to do with the same thing. There has not been much new development. So the retail outlets in Puerto Rico, even though the economy is soft, have performed very, very well,” he said. “During the recession, stores that have presence both in the U.S. [mainland] and Puerto Rico would say their best performing stores were in Puerto Rico.”
“People like to shop and there are no other choices,” Kercheval said, adding that when the economy is tough, consumers cannot afford to hop on a plane from San Juan to New York or Florida, “so they shop at home. It’s counter-intuitive, counter-cyclical but it certainly helped the local retail business.”
The latest government statistics available for Puerto Rico show that through September, retail sales reached nearly $3 billion, upholding a steady growth pattern that began earlier in the year.