Austin, TX represents the nation's best bet for retail investments, according to Ten-X.austin
IRVINE, CA—Investors with a view toward expanding their retail holdings would do well to focus on the Southeast and West, according to the latest US Retail Market Outlook from Ten-X. The forecast cites robust local economies leading to steady growth as the common factor in the top five “buy” markets, led by Austin, TX.
Conversely, the Northeast and Midwest look more like sellers' markets at the moment, judging by Ten-X's top five markets in which market conditions might cause retail investors to consider selling their properties. These cities reflect several lagging economic and demographic indicators, with stagnating wages and lackluster growth outside of the major urban cores contributing to a weakened retail climate.
Along with Austin, three Florida cities—Miami, Fort Lauderdale and West Palm Beach—along with San Francisco all are predicted to have healthy long-term growth in rent, NOI or both. With the exception of West Palm Beach, all of these cities are seeing little new supply added.
Topping the list of “sell” markets is Milwaukee, despite having a below-average unemployment rate in its favor. Like the other cities in which investors may want to consider selling, it's seeing little population growth and projections of rent growth in the very low single-digits, below the national average of 2.1%. Other markets where Ten-X gives a “sell” recommendation include Detroit, St. Louis, Memphis and Philadelphia.
The Ten-X Research report notes that e-commerce now accounts for 13% of all retail sales, and is expected to account for a bigger share down the road. Nationally, though, the very low level of new retail construction means that absorption will outpace new supply over the next two years even as the rise of e-commerce is inhibiting demand.
“As more consumers opt to do their shopping online, the retail market is battling major headwinds as it crawls toward a comeback after the downturn,” says Peter Muoio, chief economist with Ten-X. “Strong economic conditions in certain regions are propping up the sector nationally on a statistical level, but this lasting shift in behavior will remain a stubborn impediment to the retail industry in the years to come.”
The result, says Ten-X, will be continued slow recovery in vacancies. However, research indicates that demand may begin to sag by 2019, pushing vacancies back above 10% and close to recession-era peaks.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
