DEB’S RETAIL DISH AND DEALS: A POSITIVE REPORT

It’s always a highlight to receive Marcus & Millichap’s annual Retail Investment Forecast, and the 2023 edition was no exception, especially for its optimistic tone.

Debra Hazel President

Debra Hazel Communications

North Las Vegas, NV

(201)618-5247

I’ve often said that the retail real estate crisis of the past three years was a rare one in that the industry had no part in creating it: no overbuilding, no overleveraging and no wacky financing schemes in other sectors. Instead, COVID-19 came at a time when developers were being disciplined in construction and creative in finding re-leasing solutions as retailers went through the e-commerce revolution. Now, those owners/managers are reaping the benefits, the report said.

Nationally, the retail sector is expected to record the smallest vacancy fluctuation among major commercial real estate property types in 2023, the report said. With relatively little new space coming on line (pardon the pun), the sector remains a solid investment, with a diverse mix of private and institutional investors remaining active, especially in tertiary markets including San Antonio, Texas; Salt Lake City, Utah and Raleigh, North Carolina.

“Tight conditions are supported by a moderate construction pipeline, which will limit options for expanding retailers and tenants with upcoming lease expirations, a boon for retail property owners,” the report said. “Among the nation’s largest markets, more than half will record inventory growth of less than 0.5% this year, with Texas and Florida's metros collectively accounting for 40% of near-term supply additions.”

However, do expect that the sales growth of previous years will moderate as the stimulus monies are a memory, supply chain issues linger and the resulting inflation persists. With operations back to normal, the sector looks good to weather this tempest, especially for owners of necessity retail as consumers cut back on discretionary purchases.

The firm’s National Retail Index was led this year by Southeast Florida, as West Palm Beach and Fort Lauderdale claimed the top and second spots, respectively, due to healthy household formation. Jacksonville, Florida, ranked third with Tampa-St. Petersburg, Florida at No. 7 because of similar demographics. Atlanta ranked fourth. While fifth-ranked Austin, Texas also faces new supply pressure, a positive employment outlook relative to the rest of the country helps the market rank above the other major Southwestern metros of Las Vegas (16th), Phoenix (17th) and Dallas-Fort Worth (18th).

New York City came 33rd, as the very slow return of workers to offices continue to plague area retailers and vacancy ticked up 20 basis points. But tourism has bounced back and should be at pre-pandemic levels by the end of the year, the report said. The outer boroughs also continue to strengthen long-term, with leasing activity outside Manhattan at an all-time high in the last quarter of 2022.

Overall, it seems, retail has weathered COVID-19 and its ancillary crises well, good news as we gather for ICSC Las Vegas later this month. See you there!