An Outlook of the Holiday 2024 Shopping Season

Last week was Black Friday, which has traditionally marked the beginning of the Holiday Shopping Season. Based on studies conducted by numerous trade groups and economists, the 2024 season is expected to be modest compared to last year. While not good news, it's also not bad news for investors.

So it helps to talk about the Holiday Shopping Season and how it will impact the investment real estate market. 

State of Inflation

First, we need a breakdown of the current state of inflation. As of October 2024, CPI rose by 0.2% while Core CPI also rose to 3.3%. While better compared to last year, it's still far from the Federal Reserve target of 2%. Thankfully, the numbers are continuing to decline with a few bumps throughout the year. While rate hikes are unlikely, it's unclear if the Federal Reserve will cut interest rates in December.

Holiday Retail Sales in 2024

The holiday season is a critical period for the retail industry, driving significant revenue and shaping annual performance metrics. For investors in retail properties, this time of year holds heightened importance as holiday sales directly influence a property's profitability and long-term viability. Additionally, the success of a retail property has a ripple effect, boosting the value and appeal of surrounding real estate, making it a pivotal factor in broader investment strategies.

Research from the National Retail Federation (NRF) and the International Council for Shopping Centers (ICSC) projects holiday retail sales growth in 2024 to range between 2.5% and 3.5%. While this may seem promising, when adjusted for inflation, the growth narrows to a modest -0.1% to 0.8%. These figures emphasize the importance of strategic planning for retailers as they navigate a challenging economic landscape during the holiday season.

These numbers may look modest, but they are still promising a solid holiday sales season.

Consumer Confidence

Optimism is not just in the sales numbers but also in the state of consumers. Employment is still at a record high, with 159 million jobs as of October 2024 while wages are up compared to 2019. When adjusted for inflation, savings levels are at $4 trillion.

This trend is mirrored in improving consumer confidence, as sentiment begins to rebound. Post-election optimism could further uplift short-term consumer outlook, potentially driving stronger holiday retail sales. However, despite these gains, overall confidence levels are expected to remain below pre-pandemic highs, reflecting lingering economic uncertainty.

What it Means for Investors? 

A successful holiday season can make or break a retail business. For investors, however, it’s generally a win, as retail properties continue to show resilience. Strong holiday sales also signal a healthy economy, which positively impacts demand for self-storage facilities and rental housing. This makes the season particularly rewarding for those with retail or industrial assets, setting the stage for a prosperous year-end.

That said, these positive trends shouldn't automatically be seen as a green light to start acquiring retail or industrial properties. Market conditions vary, and adding these assets to a portfolio requires careful consideration. Consulting with a market expert is essential to determine whether diversification into these sectors aligns with your broader investment strategy.

The Azucena Take provides an inside look into the investment real estate market using the research done by Marcus & Millichap.