Retail Market Report: Positive Signs Abound

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More jobs, consumer confidence and housing hope make for a most welcome tale within retail.

A mid-November report indicated that 87 of the total 102 markets with more than 500,000 residents have more private-sector jobs now than a year ago. New York City, the nation’s biggest market, posted the biggest one-year gain (September 2011 and September 2012) of 143,000 private-sector jobs, while Stockton, Calif., led in proportional growth with a 4.5 percent increase during the past year. On the down side were New Orleans (6,800 private-sector jobs lost)  and Colorado Springs (down 2.3 percent).

“The Consumer Confidence Index increased again in October and is now at its highest level this year,” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers were considerably more positive in their assessment of current conditions, with improvements in the job market as the major driver. Consumers were modestly more upbeat about their financial situation and the short-term economic outlook, and appear to be in better spirits approaching the holiday season.”

Nationally, retail vacancy remained at 6.9 percent after net absorption of more than 9.22 million sq. ft. Mall vacancy was 5.8 percent, power centers at 6.2, shopping centers at 10.7 and specialty centers at 8.1 percent. Quoted rent rates were down in the third quarter to $14.49 per sq. ft.

The International Council of Shopping Centers reported a 5 percent increase in October sales for 21 companies it follows. That is substantial improvement over the 3.9 percent sales gain in September and 4.1 percent growth in October 2011. Interestingly, Apple Stores were the most productive in retailing again this year, bringing in an estimated $6,050 per sq. ft., according to RetailSails. No. 2 in the ranking was Tiffany & Co. at $3,017 per sq. ft. No other retailer eclipsed the $2,000 mark. At $137,170, Costco Wholesale led the sector in revenue per store.

Atlanta’s retail vacancy remained at 10.0 percent after net absorption of more than 343,000 sq. ft. in third quarter. Mall vacancy was 8.4 percent, power centers at 7.4, shopping centers at 14.8 and specialty centers at 11.9 percent. Quoted rent rates were down 13 cents in third quarter to $12.86 per sq. ft.

On the retail investment side, Real Capital Analytics reported that sales volume for the first three quarters of 2012 has increased 5 percent year over year to $33.8 billion and the number of properties traded has jumped 12 percent.  Of note within the sales figure is the 234 percent increase in sales volume for regional malls ($8.5 billion total). The next closest retail segment was “Urban/Storefront,” which increased 44 percent by sales volume in that period. The urban space posted the highest price level year to date at $639 per sq. ft. and an average cap rate of 5.9 percent. Single tenant retail, which came in at $197 per sq. ft., had the most cap rate compression year over year, dropping 36 basis points to a 7.1 percent rate.

According to PricewaterhouseCoopers, in 3rd quarter, there were a total of 32 merger and acquisition deals in the retail and consumer sector with values greater than $50 million, accounting for $19.8 billion in total deal value. This constituted a 60 percent increase in volume and a 160 percent increase in value from the 20 deals worth $7.6 billion during the third quarter of 2011.

Real Capital Analytics reported that bank lending to the retail sector bounced back strongly, claiming a 41 percent market share in the first half of the year, up from 28 percent in 2011.
 

Bull Realty, Inc., Research

Source: Real Capital Analytics / rcanalytics.com