Jobs, New Strategies Boost Retail Sector

CALABASAS, CA-As GlobeSt.com recently reported, US employers added just 69,000 jobs in May (the weakest monthly total recorded since May 2011). Still, the rise in employment, earnings and hours was enough to bolster consumer confidence, which clearly catalyzed retail sales performance, according to Marcus & Millichap’s recently released Research Brief blog written by Hessam Nadji, M&M’s managing director of research services. Sales receipts for department stores strengthened due to new strategies that included downsized formats, renovations, selective closings and repositioning, and property-sector fundamentals exhibited improvement nationally as well.

Professional and business services, along with education and health services, are the sectors that lead national employment growth, according to M&M’s research. The research also shows that national retail net absorption totaled 60 million square feet in 2011, nearly double the record-low 35 million square feet completed, and the overall vacancy rate declined 30 basis points to 9.7%. Nationally, asking and effective rents averaged for all retail types remained unchanged, stemming 12 consecutive monthly declines in effective rents, and projections call for a further decline in vacancy to 9.2% by year end.

Interestingly enough, softer consumer demand may have a positive effect on industrial production, the blog continues. The reduced demand is leading to businesses scaling back inventory levels, and while reduction in inventories drags GDP, it can also provide fuel for a recovery. When spending begins to gain momentum, businesses will need to increase production rather than pulling from existing stockpiles of goods to meet the new demand. Therefore, the blog predicts that the industrial sector will be the primary commercial real estate sector to benefit from increased production.