Luxury and Wholesale Segments Lead Retail Investment

Retailers at both ends of the spectrum saw healthy gains in 2011, according to Marcus & Millichap’s 2012 National Retail Report. Growth of luxury retailers at the high end and grocery-anchored shopping centers at the low end reflects the widening gap between high-income and low-income U.S. households, according to the report.

While annualized gains for luxury and wholesale retailers totaled 8 percent and 7 percent respectively, the overall retail sector fared well in 2011, posting a 6.5 percent gain over 2010. The increase came despite dips in consumer confidence and disposable income. Retail vacancy declined 50 basis points last year to 9.7 percent, a result of 119.9 million square feet of absorption in 2010 and 2011. The effective rental rate at year-end 2011 was $15.94 per square foot, which is off 9.4 percent from its 2008 peak.

Online retailers drew more consumers away from bricks and mortar stores in 2011, as consumers spent 12.4 percent more for online purchases compared to 2010. The shift is the result of consumers’ increased comfort with online purchasing and improved integration between consumers’ in-store and online shopping experiences.

Marcus & Millichap expects the vacancy rate to decline to 9.2 percent in 2012, which should help push effective rents up 1.2 percent. Store openings are expected to exceed closings, but retailers will continue closing or downsizing under-performing stores throughout 2012.