"Although we have seen slight growth in retail spend, 2019 may see another small increase and may flatten out towards the end of the year based on macroeconomics. However, an area of continued growth will be in the food, fitness/wellness, and entertainment space."
-Anjee Solanki, National Director Retail Services, USA
Nationally, consumer confidence remains at historically elevated levels, and it is no mystery why: unemployment is down, jobs are plentiful, wages and income are rising, and reduced income taxes are augmenting consumers’ purchasing power. This combination of factors translates to strong retail sales overall and expectations for strong gains in holiday sales this year. But perhaps the bigger – and somewhat surprising – news for retailers nationally: the pickup in both in-store and online sales. With the economic outlook looking to soften in 2019, retailers will want to capitalize on current consumer strength and continue innovating to bring shoppers back through the doors.
Nationwide one challenge that both landlords and retailers have been facing is the continued rise in construction costs. A shortage of skilled labor combined with rising material costs has driven construction costs up since shortly after the end of the recession. The Turner Building Cost Index, which tracks nonresidential construction costs in the U.S., reflects a 5.63 percent yearly increase in costs from the second quarter 2017.
While the Northern California region experienced total availability increasing by 19 basis points to 7.69 percent during the third quarter, vacancy fell and translated into nearly 322,000 square feet of positive net absorption. The South Bay accounted for over 66 percent of this positive net absorption posting more than 213,000 square feet of positive net absorption. The Sacramento region carried the most available retail space, with nearly 5.6 million square feet. Meanwhile, overall asking rents slightly softened during the third quarter to $22.89 per square foot. Northern California has shown very limited new construction underway, currently reporting 982,443 square feet of product under construction, with 79 percent is in the South Bay and East Bay regions.