Retail chains in the U.S., including those in the Philly Retail Space market, plan to open 42,506 new stores in the 12 months and 79,650 stores in the next 24 months, a jump of 4% and 4.2%, respectively in new store openings year to date in 2015, according to a new report.
The jump in planned chain store openings is being propelled by recent employment and retail sales growth, along with higher consumer confidence, the latest National Retailer Demand Monthly report from RBC Capital Markets says.
Retailers also have found increased confidence in the retail market from forecasts for sales of about 3.6% for the 2015 holiday season that, comfortably close to 2014’s healthy 4.1%, according to the consensus estimate of the National Retailer Federation, Deloitte and four other retail forecasters.
Lower gas prices also may be having a slow but noticeable impact on consumer budgets, potentially prompting greater nondiscretionary spending, RBC Capital Markets said. Retailer are hoping to attract these extra consumer spending with more new store openings.
Despite 2015’s steady increase in new store openings so far, new construction for shopping center redevelopment and ground-up construction has trickled down as the year has progressed, according to RBC.
Rents and occupancy are expected to enjoy healthy increases in the near term as the result of the combination of higher consumer sales, increased demand for space among retailers, and a lack of growth in new supply, RBC said.
The CoStar Group’s latest retail real estate market data backs up the forecast for increased demand for retail space, including Philadelphia retail space. CoStar notes that the national retail vacancy rate is at the lowest point since it began tracking the market, now standing at roughly 5.9% according to preliminary third-quarter data.
The CoStar Portfolio Strategy indicates that absorption has outpaced new construction by almost a 2-to-1 margin over the past year, with the amount of retail space under construction now about 38.5% below the average amount that was under construction between 2006 and 2008.
Not all retailers are seeing a rosy future for their industry. Wal-Mart Stores, Inc., the world’s largest retailer, surprised the market by forecasting a 12% decline in net profits for 2016. As a result, the retailer plans to reduce new store openings in the U.S. in the next fiscal year to between 135 and 155 stores, compared with the 354 stores it opened in the last fiscal year.
Despite strong net absorption, retail space rents are still 7% below their pre-recession peak — the only major commercial property segment where asking rents have not yet matched to their highs in the last cycle. At blame are the struggling shopping centers, especially those in the outer fringe suburbs, that have leased space at lower rates to discounters, fitness centers and non-retail users, thereby offsetting the exceptionally strong recovery in urban retail properties.
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