The retail real estate sectors may be lagging other property types a bit when it comes to property price increases and loan delinquencies, but it appears to be on the right path going forward. A new “National Retailer Demand Monthly” report from RBC Capital Markets predicts that retail rents and occupancies are set to improve, at least in the near term.
RBC researchers base their assumptions on healthy projections for this year’s holiday sales season, with a consensus growth forecast of 3.6 percent for same-store sales. An improved jobs market and especially lower gas prices have also contributed to an uptick in consumer spending, leading to steadily increasing store opening plans—a projected 79,650 new locations over the next 24 months for the retailers in RBC’s database. That’s an increase of 4.2 percent year-to-date in store opening plans.
This is happening at the same time that development pipelines for new malls and shopping centers have dried up somewhat from already low levels early in the year.
“All told, increasing consumer sales, greater demand for space by retailers and insufficient growth in new supply suggest that rents and occupancy will likely be rising at a healthy rate over at least the near term,” writes RBC Capital Markets REIT analyst Rich Moore.
An especially encouraging sign for retail landlords? Both regular and discount department stores, which often serve as anchors for malls and shopping centers, have plans to expand, in spite of what the report describes as “only modest sales growth volume in these categories.”
For example, T.J. Maxx and Marshalls, which together operate almost 2,000 stores across the country, plan to open 210 stores over the next two years (150 for T.J. Maxx, 60 for Marshalls). Kohl’s, which already has 1,134 stores, aims to open another 60.
In addition, Ross Dress for Less, which has 1,000 existing stores, plans to open 100 new locations over a two-year period. And Nordstrom Rack, with an existing fleet of 110 stores, intends to open 20 new units.