Consumer spending at retail shops is growing less robustly now than before. Retail sales in July were up 3.7 percent from one year ago, and marked a deceleration from the 5-to-7 percent growth experienced in recent past years during economic recovery periods. The retail vacancy rates will therefore barely move down from the current high level.
Regarding home-related spending, people are spending more for outdoors items rather than for indoors. Sales of building materials-and-garden equipment rose by 5.1 percent while sales at furniture-and-home furnishing shops grew by only 2.5 percent. Only a robust home sales recovery can kick up sales in these stores.
Spending at restaurants is gaining speed, up 6.2 percent from a year ago. It could be related to huge stock market gains over the past few years that may be helping the wealthier people to enjoy good food and fine wine. More restaurants could be opening.
Not at a restaurant, but spending at liquor stores also increased with surprising strength at 8 percent. Let’s hope recent gains are related to people celebrating events and not for drowning their sorrows.
The decelerating retail sale growth is not good news for commercial REALTORS® needing to find tenants for empty retail spaces, though working with Pharmaceutical companies looks to have a better pay-off. Another trend worth noting is the rise in sales via the internet, which means there will be increasing demand for warehouse spaces though not for retail spaces. As a testament of that trend, job growth in warehousing is about twice as fast as in retail trade.
NAR expects the retail vacancy rate to hover at 10 percent and retail rents to rise at 2 percent this year and next.
Two other retail sectors of note are the fast sales growth (8 percent) occurring at pharmacy and drug stores and falling sales (minus 2 percent) at sporting shops. Is America becoming less healthy or is this trend related to America getting old?
In that vein, ancient classical Greeks loved competition. There were frequent officially sponsored contests. The Olympics was one. But there were other competitions that drew huge crowds as well such as who could write the best tragic plays. The country lived by the simple motto of “a healthy mind in a healthy body”. Remember that when you’re tempted to just sit and watch TV. Get moving and think creative thoughts – about business or other matters. Raise a glass to celebrate. But don’t allow, as F. Scott Fitzgerald would lament, the drink to take you.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.