CALABASAS, CA-As GlobeSt.com reported earlier this month, one of the reasons the office and industrial real estate markets have been slow to recover despite low unemployment numbers and the Fed’s extended commitment to low interest rates has been a “crisis of confidence,” according to Hessam Nadji, managing director of research and advisory services for Marcus & Millichap, during a recent “Office and Industrial Market Review and 2013 Outlook Webcast” presented by the firm.
Happily, it seems this crisis is less evident in the retail sector as retail sales and consumer credit come into alignment. M&M’s recent Research Brief, written by Nadji, reports that the Consumer Confidence Index rose to 70.3 in September, marking the highest reading in seven months. Some factors credited for causing the rise in confidence include stronger employment growth, fewer unemployment claims, improved stock-market returns and lower gasoline prices, which helped boost a sharp rise in consumer expectations.
The research indicated that despite tepid wage and income growth, consumers are saving less, but spending cautiously at retail. Electronics and appliance stores, non-store retailers and autos contributed to the strong lift in September’s retail sales, even as a pullback in gasoline prices slowed the pace of growth in gasoline sales. A recovering housing market was another major contributor to the sales increase in big-ticket items.
The deferral of significant decisions until post-election and resolution of “fiscal cliff” issues, on which GlobeSt.com previously reported, reduces the likelihood of any wholesale roll-out of new retail stores. A slow recovery in retail-sector fundamentals continues, but the emphasis on downsizing to compact formats, trends in upgrading existing stores and mobile retailing technologies implies fewer near-term space requirements. Net absorption of nearly 57 million square feet is expected to outpace completions totaling 32 million square feet, resulting in a 30-basis-point decline in vacancy to 9.4% and 1.3% effective net growth.
* Graph courtesy of Marcus & Millichap Research Services, Federal Reserve, UCB
For the complete Research Brief blog, click here.