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09/30/2021

JLL: Consumer spending growth in 2021 will be highest since WWII

Al Urbanski
Real Estate Editor & Manager
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Apparel stores are expanding and consumers will be shopping them heavily this year, according to JLL.

The demand for retail spaces is surging. 

Net absorption of retail real estate—actual move-ins—will total 20 million sq. ft. in the second quarter of this year, according to JLL’s “Retail Outlook” for the remainder of 2021.  The new selling space promises to be busy. The global retail services company foresees an 8.8% rise in consumer spending for all of 2021, the strongest surge since World War II.

Clothing and accessories stores were by far the biggest rebounders in the second quarter, posting sales 163% higher than in the second quarter of last year.  Next on the growth chart were electronics and appliances (+78%), food and beverage (+72%), and furniture and home furnishings (70%).

The report noted that while concerns over the Delta variant and supply issues pose challenges for continued growth at the current pace through the end of the year, 2021 should still tally serious economic and retail recovery from the doldrums of 2020. Rising vaccination rates have increased shopper confidence, eased restrictions and boosted economic recovery, said JLL.

 The pace of store closures and bankruptcies has slowed to a crawl. The JLL report quoted a CoStar study saying that the United States was on a pace to see 87 million sq. ft. of retail space closed this year, the lowest amount since 2016 and nearly half of what closed in 2020.

Malls were the only retail real estate sector to see net absorption decline in the second quarter, by more than half a million sq. ft.  Meanwhile, net absorption increased by nearly 7 million sq. ft. in neighborhood centers and by 2.6 million sq. ft. in strip centers.

Filling a significant amount of that new space are the nearly 1,800 discount stores opening up this year.  The next most active expanding categories are apparel (490), restaurants (260), off-price retail (162), and supermarkets (139).

Retail rents are increasing nationwide, as well. Compared to the second quarter of 2020, they were up by 6.5% in Raleigh, 5.5% in Nashville, and 4.3% in Seattle and Atlanta. Rents remained lower than they were a year ago in Boston, San Francisco, Los Angeles, Denver, and New York.

Mall rents are likely to continue to downtrend, however, as the number of empty stores in enclosed centers have increased greatly since the second quarter of last year.  The vacancy rate is 10% at regional malls, 6.8% at super-regional malls, and 6.3% at lifestyle centers.

That trend may soon stabilize, however, as shoppers begin returning to their favorite enclosed centers. According to CoStar, July 2020 was the first month since the outbreak of the pandemic in which mall traffic exceeded 2019 levels.