Good news for retail came out of the Census Bureau yesterday. July turned out to be not just better than expected but also the month with the biggest rebound in retail sales all year, rising 0.6% for the month and 4.2% since July 2016. What’s more, revised data for May and June show a brighter picture than preliminary estimates had indicated, eliminating what had appeared to be a decline in retail sales.
"Finally, retail sales showed some life," Robert Frick, a corporate economist at Navy Federal Credit Union, was quoted as saying yesterday.
So should the commercial real estate industry feel cheered by the news? Well, yes and no.
For those who have a stake in retail properties, there is still reason for caution.
A breakdown of the retail data shows that the July uptick is driven largely by motor vehicle sales (up 1.2%) and e-commerce (up 1.3% for the month – quite possibly boosted by Amazon Prime Day, which took place July 11 – and up 11.5% from a year earlier). Although the success of e-commerce can benefit players in the industrial segment of the commercial real estate industry, given the significance of warehouses and distribution centers for e-tailers, it may not be such comforting news for those with a stake in traditional retail properties.
Somewhat obscured by the big picture, some brick-and-mortar categories did not do as well as overall retail sales might indicate. Sales at electronics and appliance stores, for instance, were down 0.5% from June to July and 0.9% from July 2016.
Other categories showed mixed findings, such as department stores, which were, a bit surprisingly, up 1% for the month (but down 1.3% for the year). Similarly, sporting goods, hobby, book and music stores were up 0.3% for the month but down 4.2% for the year. (read more)
By: Ely Razin