May 23, 2018

Heightened Consumer Confidence Remains Driver Behind Strong Spending, Improving Outlook for Retail

Stout retail sales growth a product of strong economic metrics.

The confluence of several factors contributed to another month of steady spending. Core retail sales increased 4 percent year over year in April, the third straight month of at least 4 percent annual growth. Near record-high levels of consumer confidence have aided retail sales in past months, as many consumers now have more discretionary income, largely due to tax cuts and solid wage growth. Wage gains have remained range-bound in the mid-2 percent area for the past few years, but this number is expected to rise as large companies portend wage hikes. Additionally, the unemployment rate slid below 4 percent in April thanks to another month of job creation. With a number of tailwinds propelling retail, the sector is poised for continued growth this year.

Buyers seek stability when exploring retail investment options.

As investor sentiment moves back to an upward trend, retail investments have become a more engaging option for those looking to deploy capital into commercial real estate. Positive spending trends in grocery stores have generated increased investor demand for centers anchored by these assets. High foot traffic and the adoption of omnichannel retail practices make them particularly attractive. Food and beverage sales have also generated a strong performance in recent months. Bolstered spending in this category has enticed some investors to examine quick-service and fast-casual dining investment opportunities more closely. These assets have proved to be relatively stable through a range of economic conditions, providing investors with the confidence of the assets’ durability.