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Wolfe Pack Retail Sales Update | August 2019

August retail sales grew 4.6% year-over-year (unadjusted), and up by 0.4% month-over-month, excluding automobile dealers, gasoline stations and restaurants. 

As of August, the three-month moving average was up 4.1% year-over-year versus 3.5% in July. 

While retail trends continue looking good, tariff talks are having an impact.

“While consumer attitudes about the economy indicate some retreating optimism, the bottom line is that consumer spending remained resilient in August and continued to be a key contributor to U.S. economic growth,” NRF Chief Economist Jack Kleinhenz said. “Trends remain strong, but August grew somewhat slower than July, which could reflect consumers’ concerns about the unpredictability of trade policy. It is too early to assess the impact of the new tariffs that took effect at the beginning of this month, but they do present downside risks to household spending.”’

YOY August Winners (in descending order):

  • Grocery and beverage stores were up 4.9% YOY but down 0.2 percent month-over-month seasonally adjusted.
  • Sporting goods stores were up 3.8% YOY and up 0.9 percent month-over-month seasonally adjusted.
  • Health and personal care stores were up 2.9% YOY and up 0.7 percent month-over-month seasonally adjusted.
  • Clothing and clothing accessory stores were up 2.3% YOY but down 0.9 percent month-over-month seasonally adjusted.
  • General merchandise stores were up 2.2% YOY but down 0.3 percent month-over-month seasonally adjusted.

YOY Losers:

  • Electronics and appliance stores were down 2.9% YOY and unchanged month-over-month seasonally adjusted.
  • Building materials and garden supply stores were down 0.6% YOY but up 1.4 percent month-over-month seasonally adjusted.
  • Furniture and home furnishings stores were down 0.1% YOY and down 0.5 percent month-over-month seasonally adjusted.

Online & Other Non-Store Watch:

  • Online and other non-store sales were up 14.3 percent year-over-year and up 1.6 percent month-over-month seasonally adjusted.

What do you think about the latest numbers and category trends?

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

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Net-Leased Retail Research (Fall 2017)

Marcus & Millichap recently released the Net-Leased Retail Research Fall 2017 Report which looks at the current net-lease landscape including key indicators such as employment, 1031-exchange activity, retail sales growth, and the 10-year Treasury. Following are key highlights I gathered from the report:

  • Job growth remains steady, with gains averaging 174,000 positions per month over the past year. This has resulted in the unemployment rate reaching the lowest level since 2001.
  • Net-leased development remains the predominant sector of overall retail construction. Of the approximately 60.4 million square feet of retail space delivered over the past year, more than 46 million square feet was composed of single tenant net-leased retail. Dollar stores, quick-service restaurants, and pharmacies are the single-tenant concepts that have experienced the most construction activity in 2017.
  • Driven by investor desire to shift their portfolios toward less management-intensive assets, 1031-exchange volumes make up a considerable portion of the net-lease marketplace. So far in 2017, exchange-related buyers encompass more than 40 percent of transaction volumes. As a result, the status of this tax provision moving forward will remain a major driver of deal flow and investment demand. Any potential changes to the tax code that significantly impact 1031 Exchanges would have a serious impact on this sector so it is certainly something to watch closely.
  • Overall, leverage on acquisition loans has continued to reflect disciplined underwriting, with LTVs typically ranging from 60 percent to 70 percent for most retail properties. Going forward, The Federal Reserve’s plans to normalize its balance sheet will place upward pressure on interest rates.

The Net Lease Report also includes a summary of credit rating, number of locations and range of cap rates related to sales by several different brands and sectors. Download the report below. As always, at the Wolfe Retail Group of Marcus & Millichap, we are available to discuss this information in depth, including any impact this may have on any of your projects. We remain optimistic that 2018 will be another strong year for our sector of the commercial real estate industry. Feel free to message me via LinkedIn.