May 23, 2019
Retail spending increased steadily in April, rising 3.2% on an annual basis and extending a trend of stabilized consumption, according to new research by Marcus & Millichap. One of the key drivers continuing to fuel the retail sector is a tight U.S. job market, which has dropped unemployment to a 50-year low. That, in turn, has prompted more discretionary spending, as employers boost wages to attract talent.
Marcus & Millichap notes single-tenant-oriented retailers, including bars and restaurants, home improvement vendors and pharmacies, continue to drive spending. Yearly sales growth for these retailers ranged from the upper-3% to upper-4% range in April, well outpacing other retail categories.
Growth rates for general merchandise and grocery sales were clustered in the mid-2% realm, while a variety of other categories recorded negative changes, reports Marcus & Millichap.
While spending at single-tenant establishments is further supported by rising levels of discretionary income, performance among these assets remained consistent as Marcus & Millichap says the average cap rate has stayed in a tight range for the past three years.
An interesting theme is emerging within the restaurant category. Historically high consumer confidence is benefiting bars and restaurants, as this sector has averaged 6.2% growth over the past year, outperforming most other retail sectors, reports Marcus & Millichap. Increased food delivery orders are underpinning the accelerated pace of growth; however, they are changing restaurant layouts, encouraging kitchen-only sites to counter rising delivery costs.
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