How Shoppers Got Their Groove Back

Like Northern Plains settlers stepping out of their cabins after a snowbound winter, consumers are treating the first signs of spring in the economy as an occasion for driving to stores and prying their wallets open just a little wider than they had since the depths of the recession. “Everyone has come to the realization that the worst is over,” says Tom Swieca, an SVP with Voit Real Estate Services in Ontario, CA. “Consumer confidence is improving from the depths of what it was in 2008.” Given that consumer spending comprises about 70% of the economy, it bodes well that shoppers are now more willing to shop.

Swieca’s bailiwick, the Inland Empire, provides an especially clear vantage point of the valley in which consumer confidence had descended. “That area was hit exceptionally hard because we had so much unprecedented residential growth,” he tells Real Estate Forum. Amid the rapid appreciation in home prices in the mid-2000s, “people pulled money out of their homes to buy a Mercedes, put in a swimming pool or start their own businesses. Then when the market crashed, it crashed hard.”

Gerald Mason, New York City-based executive managing director with Savills US, similarly sees encouraging news on the consumer front. He cites the differences in the relative economic health of the US and Europe as a key factor. “When you look at the euro zone, it’s pretty bad,” he says. “They’re in another recession, they’re going backwards, there’s no job creation.” By contrast to European banks, which the International Monetary Fund now says may be forced to sell off $3.8 trillion in assets over the next 18 months, US lenders are mainly on the upswing. Mason says general economic growth here has been “in lockstep” with that trend. Consumer spending is no exception.

But April’s retail sales gains were underwhelming after a comparatively strong showing in February and March. The International Council of Shopping Centers said earlier this month that April same-store sales for chains rose 0.6% on a year-over-year basis compared with a 4.1% rise in March. However, ICSC says this falloff can be attributed in part to a late Easter and cooler weather, and that when March and April tallies are bundled together, the results are in line with the slow, steady improvement that’s characterized this recovery…

…For the rest of the story, go to the May 2012 issue of Real Estate Forum.