As we have done for the past nine years, the Retail Group of Cox, Castle & Nicholson LLP has, once again, taken on the daunting task of forecasting what to expect in the forthcoming year in four critical segments that affect the retail industry. In doing so, we analyzed the social, political and economic events of 2017, reviewed various economic data and projections and have come to certain opinions relating to the retail industry and where it is heading in 2018. Below is the product of our thinking, in the form of four articles of interest addressing such topics as capital markets, retailing, retail development and the impacts of residential development on retail.
CAPITAL FOR RETAIL IN 2018 – ARE WE IN FOR A SMOOTH GLIDE OR A NOSE DIVE?
By: Gary Glick
Since the Great Recession of 2008/2009, the steady growth in the commercial real estate capital and lending markets has led many real estate professionals and commentators to look for signs that this expansionary cycle would be ending. Historically, most real estate recoveries tend to last for approximately seven years. As we enter the eighth year following the Great Recession, this recovery is different. It has been one of steady but moderate growth. Based upon the tremendous upheaval caused by the Great Recession, lenders and investors have remained conservative and moderated their behavior – although, in the case of lenders, some of this was required due to government regulation. In addition, interest rates have rarely, if ever, remained at such historically low rates for so long. Despite predictions that the Federal Reserve would more aggressively raise the discount rate in 2017, this has not proven to be the case.
RETAIL LOOKING GOOD FOR 2018
By: Scott Grossfeld
A lot has happened in a year. Our forecast article for retail in 2017 indicated that the fundamentals of a good economic recovery in the U.S. retail sector had taken root and retail was well positioned. However, there was also reason to be cautious, due to the recent U.S. election of President Trump, the uncertainties of his policies and the change of government.
RETAIL DEVELOPMENT – RIDING THE TAIL WINDS
By: Dan Villalpando
As calendar year 2017 approached, many in the retail development industry felt a sense of tempered optimism, and those feelings appear to have borne out. Statistically, calendar year 2017 turned out to be a good year for retail developers (and retailers), with estimates that core retail sales in 2017 rose approximately 3.8% over sales in 2016. Although such growth is not as robust as many had hoped, it does represent movement in the right direction, and begs the question: Can we expect to see even more improvement in 2018? Based on positive news regarding the gross domestic product, continued growth in the job sector and the influx of foreign investment dollars, it appears that there may be reason to expect that retail development will continue with another steady uptick this coming year.
ECONOMIC INDICATORS ARE POSITIVE, BUT DEVELOPMENTS IN WASHINGTON MAY BE TAXING ON THE HOUSING MARKET
By: Jeremy Gruber
Our 2017 forecast pondered whether last year would continue the “red-hot recovery” of the post–Great Recession years, or, instead, would be the year that the housing market started to come back down to earth after years of consistent gains. Looking back, it is clear that 2017 was another very strong year for the residential market. Driven by, among other things, low interest rates, strong demand and a continued inventory shortage, average home values increased by over 6% nationally in 2017 (well above 3% “normal” growth) with values rising each month of the year according to the S&P Corelogic Case-Shiller National Home Price NSA Index. California home values jumped an estimated 7.2% in 2017, according to the California Association of Realtors (“CAR”). Housing starts picked up toward the end of 2017 after a slow middle of the year, with single-family starts reaching a decade high in November of 2017 (though multi-family starts continued to slump). The homeownership rate continued to rebound in 2017, reaching 63.9% in the third quarter after falling to a four-decade low of 62.9% in the second quarter of 2016. And in November 2017, according to the National Association of Realtors (“NAR”), existing home sales reached their highest level since 2006, while new home sales reached their highest level since 2007.
If you have any questions regarding this publication, please contact:
Gary Glick - 310.284.2256 or firstname.lastname@example.org
Scott Grossfeld - 310.284.2247 or email@example.com
Daniel Villalpando - 310.284.2278 or firstname.lastname@example.org
Jeremy Gruber - 310.284.2129 or email@example.com