Confident Consumers Trigger Retail Sales Growth

 

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Research Brief
February 2017
RETAIL SALES
Developing Trends
As e-commerce has grown to represent 12 percent of retail sales, the two largest retailers are pursuing different strategies to drive revenue growth. Wal-Mart recently acquired Moosejaw, which follows the 2016 purchase of Jets.com, in order to drive more traffic to its web portals. Meanwhile, Amazon is expanding third-party offerings on its platform. A recent announcement highlighted a 50 percent increase in third-party sales over the holidays. Significant growth in e-commerce is driving demand for industrial spaces, prompting a 50-basis-point decline in vacancy to 5.7 percent in 2016.
Sales surged 8.5 percent at health and personal care stores over the past year. Boosted by a deal with Target to acquire its in-store pharmacies, CVS added 1,900 locations in 2016.
Nationwide vacancy in retail properties declined 50 basis points over the past year to 5.5 percent, matching the previous cycle lows. Asking rents rose 3.3 percent over that time frame. The 2017 forecast shows vacancy falling an additional 40 basis points to 5.1 percent.
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Confident Consumers Trigger Retail Sales Growth
Consumers followed up robust holiday spending with equally impressive activity in January as core retail sales vaulted 4.4 percent over the past year. Consumer confidence remains near the highest levels of the past decade, reflecting heightened expectations for economic conditions and sentiment. This positive outlook, together with steady job growth and wage gains, has boosted consumption. Rising inflation, driven by strong gains in oil prices, pushed CPI up 2.5 percent over the past year. The ascending inflation bolsters the case for the Federal Reserve to move towards normalizing interest rates over the coming year. After meeting in December, the Federal Reserve announced its intention to hike interest rates three times in 2017.
4.4% Core Retail Sales
Y-O-Y*
2.5% Inflation/CPI
Y-O-Y*
* Through January Sources: Marcus & Millichap Research Services; U.S. Census Bureau; National Retail Federation; University of Michigan Consumer Confidence Index
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real-estate industry. The Research Brief is published by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc.
© 2017 Marcus & Millichap. All Rights Reserved.
23975 Park Sorrento | Suite 400 | Calabasas, CA 91302 | Telephone: (818) 212-2250

 

 

Hiring Bounces Back in January, Offers Upbeat Commercial Property Outlook

 

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Research Brief
February 2017
EMPLOYMENT
Developing Trends
Employers added 227,000 positions last month, a notable increase from the average of 148,000 jobs created monthly in the fourth quarter last year. Consumer-oriented employment sectors stood out in January, with retail, healthcare, and leisure and hospitality adding a combined 104,000 workers during the month.
An accelerated pace of hiring is taking shape in office-using employment sectors. The addition of 23,000 technical services workers and 32,000 financial services jobs in January will drive the absorption of office space and help push down the U.S. vacancy rate to 14.2 percent this year.
Unemployment and underemployment rates ticked up last month to 4.8 percent and 9.4 percent, respectively. Reduced labor market slack will drive wage growth, potentially initiating the re-entry into the labor force of discouraged workers and raising the labor force participation rate to maintain job growth.
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Hiring Bounces Back in January,
Offers Upbeat Commercial Property Outlook
Broad-based and robust hiring during January extends last year’s labor market momentum. Other indicators were also positive last month and show a tight labor market, imposing a potential headwind for employers this year. The shrinking labor pool and potential misalignments of skills required to fill open positions may moderate hiring to less than 200,000 jobs per month in 2017. The average hourly wage rose 2.5 percent over the past year. A constricting labor supply is seen as the impetus for an accelerated pace of wage growth and a tailwind for consumer spending. Potentially higher spending at restaurants and stores will maintain healthy operations at retail properties and support a reduction in the national retail property vacancy rate to 5.1 percent this year.
227,000 Monthly Job Gain
January 2017
2.5% Wage Growth
Through January 2017
Y-O-Y
* Through January
Sources: Marcus & Millichap Research Services; BLS
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real-estate industry. The Research Brief is published by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc.
© 2017 Marcus & Millichap. All Rights Reserved.
23975 Park Sorrento | Suite 400 | Calabasas, CA 91302 | Telephone: (818) 212-2250

 

 

Single-Family Housing Supply Falls to Record Low, Tight Market Strengthens Apartment Demand

 

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Research Brief
January 2017
HOUSING
Developing Trends
The available existing single-family homes for sale reduced to just 3.6 months of supply in December based on the current sales pace, an all-time low. With steady demand for homes and inventory tightening dramatically during the year, existing single-family home prices edged up 3.8 percent from 2015 to $238,520 in December.
A competitive buying market has kept many potential first-time home buyers on the sidelines. In December, first-time buyers accounted for 32 percent of sales, remaining flat from year-end 2015 and falling well below the long-term average of 40 percent.
Single-family home construction remains limited, but multifamily builders are set to deliver a record number of apartments this year. After completing 284,000 units in 2016, new units will total 371,000. Though households continue to favor rentals over home ownership, 2017 vacancy will tick up 20 basis points to 4.1 percent as new supply is absorbed, remaining at a historically low level.
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Single-Family Housing Supply Falls to Record Low,
Tight Market Strengthens Apartment Demand
Wage growth and rising household formation are generating healthy demand for housing. The for-sale market is stuck in neutral, however, as tight supply, rising mortgage rates and upward pressure on existing home prices have muted growth. Limited for-sale inventory and lifestyle changes favoring renting are keeping many would-be owners in rental housing. This supported apartment vacancy falling 20 basis points in 2016 to 3.9 percent. An increase in new home construction would help alleviate some pressure, but rising construction costs are keeping housing starts at bay, ending the year up 4 percent from 2015. The median price of new homes sold during December increased to $318,850, due to an increased proportion of sales of homes being above $300,000. This suggests that construction of entry-level homes is not occurring at a pace needed to jumpstart the housing market.
$238,520 Median Price of Existing Single-Family Home in
December 2016
3.6 Months of supply at current sales pace in December 2016
Sources: Marcus & Millichap Research Services; U.S. Census; MPF Research; National Association of Realtors
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real-estate industry. The Research Brief is published by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc.
© 2017 Marcus & Millichap. All Rights Reserved.
23975 Park Sorrento | Suite 400 | Calabasas, CA 91302 | Telephone: (818) 212-2250

 

 

Employment Momentum, Accelerating Wages Support Real Estate Performance Outlook

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Research Brief
January 2017
EMPLOYMENT
Important Factors
December employment growth of 156,000 jobs moderated from the pace seen through much of 2016. Yet, given that the economy is approaching full employment, job creation above 100,000 positions per month is more than enough to match labor force growth.
Education and health services together with professional and business services combined for 52
percent of new jobs created during 2016. Both sectors benefit from emerging technology and demographic trends continuing into 2017 and tend to create higher-wage positions. During 2016, these expanding sectors pushed office vacancy down by 40 basis points to 14.4 percent.
Although the 5.6 million current job openings sit near a record, a sub-5 percent unemployment rate
tempered employment growth. Hiring in the coming year could moderate as employers struggle to fill positions in a tight labor market, but the modest easing does not signal economic slowing. Apartment demand highlights this trend as 2016 absorption reached the third-highest yearly total on record at 328,000 units, with prospects for 2017 remaining optimistic.
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Employment Momentum, Accelerating Wages Support Real Estate Performance Outlook
The employment market consistently signaled steady economic growth last year despite numerous unanticipated events that could have upended the expansion. Nationally, 2.2 million jobs were created during 2016, with unemployment dropping to its
lowest level since 2007. The economy has generated 75 straight months of positive growth, the longest on record.
The tightening labor market finally achieved accelerated wage growth as
average hourly earnings jumped 2.9 percent since December last year, the strongest pace of wage growth since the expansion began. Rising wages have been a missing piece in the current expansion and will enable households to increase consumption going into 2017, sustaining economic momentum and bolstering the retail sector.
156,000 Monthly Employment
December 2016
2.9% Wage Growth
Through December 2016
Y-O-Y
* Forecast
Sources: Marcus & Millichap Research Services; BLS
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real-estate industry. The Research Brief is published by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.