January 16, 2018
Holiday sales during November and December increased 5.5% over the same period in 2016 to $691.9 billion, as growing wages, stronger employment and higher confidence led consumers to spend more than had been expected, the National Retail Federation (NRF) reported. The number, which excludes restaurants, automobile dealers and gasoline stations, includes $138.4 billion in online and other non-store sales, which were up 11.5% over the year before.
The results exceeded NRF’s forecast of between $678.75 billion and $682 billion, which would have been an increase of between 3.6 and 4%, and marked the largest increase since the 5.2% year-over-year gain seen in 2010 after the end of the Great Recession.
NRF notes the strong numbers are evidence that the retail industry may be more fundamentally resilient than many analysts believe.
NRF’s Matthew Shay says, “We knew going in that retailers were going to have a good holiday season, but the results are even better than anything we could have hoped for, especially given the misleading headlines of the past year. Whether they shopped in-store, online or on their phones, consumers were in the mood to spend, and retailers were there to offer them good value for their money.”
It was a challenging year for traditional retailers that have struggled to shift to meet consumer shopping preferences, as well as deal with the growth of online. Thousands of stores have closed, workers were given pink slips and retailers offered deep discounts.
Reis economist Barbara Byrne Denham notes the retail real estate statistics camouflage the changes in the retail sector. Although the vacancy rate was flat for Q4 2017 and the year, new tenants including grocery stores and gyms are taking space formerly occupied by bankrupt businesses such as Kmart. At the same time, some retail space is shutting down entirely or getting converted to other uses.
Rent growth has been low but still positive throughout 2017, reports Reis. Asking rents increased 0.5% to $20.85-per-square-foot. This increase amounts to $0.10-per-square-foot. The effective rent increased 0.5%,as concessions are not as significant in retail real estate as other property sectors.
“Retail has proven once again that it is the most nimble industry in the economy, able to transform and reinvent itself to meet always-changing consumer demands,” Shay said. “Retail today doesn’t look like retail 10 years ago, and it certainly won’t look the same in another 10 years. But retail is retail, and will always be here to serve its customers.”
Connect Retail West is coming up January 25th at the Hurley Surf Club Pacific City in Huntington Beach, CA. Here’s where to get more information and register.
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