M&M: Despite Department Store Closings, Retail Sales Boosted by Three Significant Trends

Retail sales vaulted 4.4 percent in 2016, driven by consistent job growth, wage growth and high consumer confidence, according to a research brief from Marcus & Millichap. These three trends have fostered a strong retail consumption environment that will continue to support retail center performance.

Consistent job growth saw the addition of 2.4 million workers in 2016. Wage growth has averaged 2.3 percent annually and consumer confidence has remained near decade highs.

Obscuring the positive performance in local community retail establishments was the department store closures from Sears, Macy’s and JC Penney, as well as the bankruptcy of hhgregg. In 2016, sales fell 5.6 percent in the department store segment and 6 percent for electronics retailers.

Other specialty stores, such as Ulta Beauty and Dick’s Sporting Goods, have reported strong sales growth and opportunity for expansion. Ulta Beauty unveiled plans for 100 new locations over the coming year. Sales in the health and personal care sector grew 6.1 percent last year. Dick’s Sporting Goods plans to open 43 new stores this year. Sporting goods sales rose 4.6 percent.

Vigorous grocery demand continues in local communities. Grocery chains will anchor and open more than 280 local neighborhood centers this year. As a result, retail vacancy has fallen to the lowest level in 16 years, ending 2016 at 5.5 percent. Vacancy is forecast to fall an additional 40 basis points this year. To combat e-commerce competition, Midwestern grocer Meijer is experimenting with an omnichannel approach, offering home delivery in six states.

To read the full research brief, click here.

—Kristin Hiller

Content Partners
‣ Arbor Realty Trust
‣ Bohler
‣ Lee & Associates
‣ Lument
‣ NAI Global
‣ Northmarq
‣ Walker & Dunlop

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