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Retail Basics Stay Positive – The Commercial Real Estate Guide

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Despite problems with inflation, rent growth in the sector, leasing and activity in the capital markets remain stable, according to JLL.

James Cook, director of US retail research at JLL. Image courtesy of JLL

Despite inflationary headwinds creating challenges for shoppers by reducing purchasing power and consumer confidence, JLL‘s Retail trade outlook for the second quarter of 2022 finds that retail fundamentals are solid, with net absorption remaining positive for six consecutive quarters, leasing at its highest level in nearly five years, strong capital markets activity and rising rents in neighborhoods and strip centers.

While concerns remain as inflation continues to remain stubbornly high with July’s CPI at 8.5 percent year-on-year, just below June’s 40-year high, JLL’s retail team found plenty of bright spots across the sectors.


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“Retail spending continues to rise overall, even after adjusting for inflation. But now we’re seeing that rising prices are having a bigger impact on buyer behavior,” said James Cook, director of Americas research, JLL. Commercial Property Executive.

“Shopper surveys show that consumers are looking for value and changing their shopping habits to get it. But while they may have said inflation would force them to spend less, we don’t always see that happening. For example, our recent back-to-school survey found that parents planned to spend about the same as last year. I’m cautiously optimistic that will also be true for holiday shopping.”

Major leasing markets in the US
Major leasing markets in the US. Chart courtesy of JLL

The best finds

Some of the key takeaways from the forecast include:

  • In June, retail sales excluding gasoline, autos and retailers totaled $378 billion, up 22 percent from pre-pandemic levels.
  • The first half of 2022 saw strong activity in the US retail capital markets, with total transaction volume of just under $44.7 billion, including M&A deals, an 81 percent increase over last year.
  • Experienced renters are seeing the strongest recovery in foot traffic, with visits to movie theaters, entertainment venues and fitness centers up 39.4 percent year-over-year in the second quarter. Fueled by two major blockbusters –Top Gun: Maverick and Jurassic World Dominion— in the second quarter, the number of visitors increased by 127.6 percent compared to the previous year. In June alone, the two films grossed more than $300 million. Fitness center attendance was also the highest in years in the second quarter.
  • Consumer spending rebounds in June and back-to-school shopping: Retail sales rose 1.0 percent in June, compared with May, when retail sales fell 0.3 percent. Real spending on durable goods also rose 1.2 percent in June from the previous month after falling 3.5 percent in May.
  • Net absorption in the U.S. remained positive for the sixth straight quarter, although it fell 12.2 percent to 18.9 million square feet. However, net absorption hit another five-year high of 94.3 million square feet over the past 12 months.
  • JLL reports that just over 250 million square feet of retail space was leased in the past 12 months. Current estimates expect the leasing figure to reach 78 million square feet in the final second quarter of 2022, which would be the highest since the fourth quarter of 2017. QSR restaurants such as Starbucks and Taco Bell and cellular retailers, including T-Mobile and AT&T, are leasing small spaces. Dollar stores, off-price retailers like TJ Maxx, fitness centers and experiential retailers are increasingly leasing larger spaces as consumers return to pre-pandemic behaviors.
  • Retailers announced 4,432 store openings this year, compared with 1,954 closings. Net openings since the beginning of the year totaled 2,478. Discounters were the most active, followed by restaurants and clothing stores. JLL notes that if this pace continues, it will be the second consecutive year of positive net openings, following three years of negative net openings from 2018 to 2020.
  • Neighborhoods and shopping centers saw the highest rent growth in the second quarter, up 1.2 percent from the previous quarter and up 5 percent from a year ago.
  • Smaller mall take-up also increased, with 6.8 million square feet in the second quarter and 41.6 million over the past 12 months. However, net mall take-up fell slightly to minus 7,330 square feet due to fewer tenants moving into super-regional malls in the second quarter.

Cook said it’s no surprise that smaller stores are doing better than malls.

“Retail that serves our daily needs is usually found in neighborhoods and strip malls. Buyer demand for this type of retail was the highest since 2020. However, this may decline next year as shoppers spend more time on leisure trips, business trips and outings with friends and family,” Cook said. CPE.

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