Dismal first half gives way to optimism for U.S. retail real estate

The U.S. retail sector is showing signs of a rebound, and that could have a much-needed positive impact on retail real estate, according to Cassidy Turley’s September retail report released yesterday.

The report cites U.S. Bureau of Economic Analysis data showing consumer spending rose 0.5 percent in July, the largest increase since December 2009, and wages and disposable income gained 0.4 percent. Combine these improvements with gas prices dropping 40 cents per gallon since mid-May, and consumers appear ready to spend for the first time since the start of 2011. In fact, since April, the retail sector has added 97,000 jobs to accommodate the trend.

But that has yet to be reflected in the sector’s real estate. National retail vacancy rates are still hovering above 10 percent, whereas the historical average is 7 percent. Net absorption also declined in this year’s second quarter, by 2 million square feet, for the first time in a year.

Thus, while the retail real estate sector experienced a clear setback in the first half of 2011 — when Gross Domestic Product rose just 1 percent, compared to a healthy 3 percent in 2010 — there’s reason for optimism going forward. — Adam Fusfeld