All Signs Point to Record Holiday Retail Sales

The holiday retail season looks like it should shape up to be modestly positive, a good sign that reiterates the prospects of a soft landing, according to a new news video from Marcus & Millichap.

“As we look beyond the holidays, the outlook is still very difficult to discern,” according to John Chang, the firm’s national director of research and advisory services.

“In general, retail sales have sustained positive momentum,” he said.

ICSC is forecasting 3.8% year-over-year growth for the holiday season, which is in alignment with the National Retail Federation’s forecast of 3% to 4% gains.

“Those growth rates are on an absolute basis,” Chang said. “They’re not inflation adjusted, but even on an inflation-adjusted basis, the National Retail Federation’s forecast of about $960 billion of holiday retail sales would be a record up by about a half a percent versus last year.”

These gains will be supported by a variety of positive factors, according to Marcus & Millichap.

First, 2.9 million more people are employed this year compared to last, a gain of 1.9%.

Second, inflation-adjusted disposable income is up by 3.5% from last year.

Third, although total inflation-adjusted savings is down by 1.6% compared to last year, savings are still elevated and about 3.6 trillion inflation-adjusted dollars are above pre-pandemic levels.

“All three of these economic drivers will support the holiday sales climate benefiting both brick and mortar locations, as well as e-commerce sales, which constitute about 21% of the total,” Chang said.

“And while the holiday retail season can make or break the year for a retailer, from a commercial real estate perspective, it tends to influence space demand only modestly. That said, the retail sector remains strong.

Looking bigger picture, the retail sector’s absorption rate has been positive for 12 quarters in a row, filling 188 million square feet in that time.

In the third quarter, the absorption of 10 million square feet modestly outpaced completions, keeping the vacancy rate stable at 4.6%.

Industrial commercial real estate has also been strong with a third quarter marking the 54th consecutive quarter of positive space demand.

But unlike retail, builders continue to deliver industrial property at a record pace.

This year, approximately 400 million square feet will come online, which is pushing the vacancy rate higher. As of the third quarter, industrial vacancy was 4.8%.

“There are a lot of variables in play, but the momentum has generally been positive and most of the forecasts for 2024 still call for slow but steady growth,” he said.