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The retail sector has been the focus of a regular stream of dire headlines through the past several years, often citing a “retail apocalypse” allegedly taking place. Certain major retailers indeed face significant challenges, fueled by oversupply as e-commerce has rapidly reshaped the entire CRE space.

Yet, the often-grim headlines surrounding the sector belie the fact that retail is a diverse and generally healthy asset class. In 2017 and 2018, net store openings outpaced store closings by nearly 8,000 nationwide.1 Restaurants and bars, mass merchants and convenience stores saw the most activity in this two-year span. Malls remain under secular stress, but retail is a diverse sector certainly not on the verge of a collapse.

Against the backdrop of moderating CRE activity, retail completions (finished construction projects) nearly halved from 2017 to 2018. Completions are forecast to remain roughly flat in 2019 and 2020 and decline modestly thereafter. As the figure below shows, however, asking rents have moved steadily higher following the global financial crisis, from approximately $19 per square foot in 2011 and 2012 to $21.52 this year, with additional growth forecast for the coming years.2

Sector-wide, retail’s year-over-year price gain of approximately 3.0% trails the other major sectors but marks the best growth for the sector since 2016.3 Solid consumer spending, spurred on by a still-healthy employment picture and loose monetary conditions, could provide a continued level of support for the retail CRE market going forward.

1 Cushman & Wakefield, “What’s Next: U.S. Economic Outlook and Implications for the Property Markets,” April 2019.
2 Reis, as of March 31, 2019.
3 Real Capital Analytics, as of May 31, 2019.

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