by Shane Henson — December 12, 2012—Relatively stable pricing and pent-up demand for non-durable goods will drive up consumer spending slightly in 2013, but retail real estate performance is unlikely to see dramatic improvements until employment growth accelerates, according to Jones Lang LaSalle’s 2013 National Retail Real Estate Outlook. Experts from the company, a global financial and professional services firm specializing in commercial real estate services and investment management, detail these and other findings in the new report.
As 2013 approaches, several sources of uncertainty that have hindered retail sales will be alleviated, while others continue to weigh on business and consumer confidence. The November election is over, and Jones Lang LaSalle’s forecast assumes that lawmakers will act to avert a fiscal and economic collapse, even if only by means of a temporary compromise. Lingering risks to retail sales in 2013 include a potential spike in energy prices, natural disasters, geopolitical instability abroad and structural shifts in buying patterns and online purchasing.
Retail real estate fundamentals, too, are in a tug of war between positive and negative trends that will largely cancel each other out in 2013, leaving overall occupancy and rental rates to stagnate, says Jones Lang LaSalle. Some retailers will expand aggressively, but there is a concurrent trend toward smaller store footprints. And as some chains vacate big box spaces or close altogether, off-price department stores and other retailers will seize upon those opportunities to backfill the space.
According to the report, other key things to expect within the retail real estate market include:
- Retailers will open as many as 78,325 stores in the next two years—up 11 percent from year-end plans in 2011.
- Non-durable purchases will outperform throughout 2013, with a marked improvement expected in the second half, reflecting stable core prices (excluding food and energy).
- Construction will add 52 million square feet of space in 2013, more than double the 20 million square feet completed in 2012.
- More retailers will add stores-within-anchors: Target has added Apple displays and small shops; J.C. Penney operates mini-stores such as Mango and Sephora and plans to open hundreds of in-store shops; and Finish Line plans to open 450 stores inside Macy’s.
