Holiday Shopping Sentiment Remains Strong Despite Recession Fears
Retail sales, excluding autos and gas, are at an all-time high, hitting $500 billion in October.
Even as the risk of a recession looms ever-larger in 2023, the holiday shopping sentiment is positive, according to one industry expert.
Retail sales, excluding autos and gas, are at an all-time high, hitting $500 billion in October and up 3.1% in real inflation-adjusted growth from last year. It’s also up by an inflation-adjusted 23% since October 2019, prior to COVID.
“Think about that for a minute,” says Marcus & Millichap’s John Chang. “In just the month of October, US retail sales totaled half a trillion dollars…that’s a lot of spending coming into the holiday retail cycle.”
The total holiday sales estimate including F&B is expected to reach $1.1 trillion, the best holiday sales total ever, as well. So why are industry analysts forecasting such robust spending?
Chang says there are four major reasons: unemployment is at a low of 3.7%, while wages are up 4.75% over last year and are 14.1% higher than before the pandemic. And personal savings are up $4.4 trillion over pre-pandemic levels, while retailers appear poised to shed excess inventory this holiday season and “may put some deals out there,” he says.
“Increased spending is generally good news. It will give retailers and restaurants a shot in the arm, boosting their revenues but also invigorating their retail space needs.”
The national retail vacancy rate in Q3 was the same was it was in the third quarter of 2019 at 4.8%. And of the 50 markets Marcus & Millichap tracks, 22 have a lower vacancy rate now than before the pandemic. In other words, “it appears the sector has once against dodged a fabled retail apocalypse,” Chang says.
A diversified tenant mix will be key going forward for retail centers, especially as consumers are spending more on services than goods and sales at restaurants and bars pick back up post-COVID. Chang says the fluctuations in consumer preferences illustrate the value of having a diverse tenant mix, especially given the uncertain economic road ahead in 2023.