Retail investments continue to outperform, with a positive outlook that blends limited construction with an accelerating economy, rising wage growth and increased consumption. Though the news media focused heavily on the demise of well-known retailer brands,implying that the sector was poised for extinction, store openings dramatically outpaced closings and corporate profits in the retail sector eclipsed past records.
The coming year holds the prospect of exceptional dynamics for retail investors. The economic boost offered by the new tax law together with particularly low unemployment levels suggest that discretionary income could increase substantively, driving retail sales well ahead of their already elevated levels. This will reinforce retailer expansion, though available space could restrain absorption. The national average vacancy rate now stands at its lowest level since the 1990s, and all indicators point to further tightening in the year ahead. Within this context, rent growth is expected to maintain momentum, pushing the average national rent to a record high.
Single-tenant retail investments have been particularly favored throughout this cycle, with demand for these low-management assets often outpacing availability. The new tax law, featuring a deduction for pass-through entities, could invigorate demand as additional passive investors consider real estate investment options. This increased capital fl ow to real estate assets, however, could be at least partially countered by rising interest rates.
Undoubtedly, new challenges will emerge in 2018, but a broad range of forward-looking metrics point to continued strength for retail investments. As you define your plans in this dynamic climate, our investment professionals stand ready to help you evaluate your options and implement your strategies.
RELATED NEWS
2018 Industrial North American Investment Forecast The convergence of a variety of positive factors has invigorated the outlook for industrial investments to a level unseen in past years. The prospects of accelerated economic growth...
2018 Multifamily North American Investment Forecast Apartment investments will maintain a positive outlook in 2018 as the combination of steady job creation, healthy demographics and an accelerating pace of household formation sustains renter demand.
2018 Office North American Investment Forecast The coming year holds the prospect of being particularly dynamic for office investors. The combination of the new tax law, an increasingly competitive employment market and evolving...
