An Outlook of the Holiday 2023 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 2023 season is expected to be one of the strongest on record. This of course is welcoming news for investors of retail property. 

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 2023, CPI dropped to 3.2% while Core CPI dropped to 4%. While still far from the Federal Reserve target of 2%. Thankfully, the numbers are continuing to decline with a few bumps throughout the year. 

This also means that the Federal Reserve is unlikely to raise interest rates in December and January. The chances of a rate hike in 2024 are not off the table yet. However, the numbers indicate it might be a promising year. 

Retail Sales 

With only a few exceptions, retail has seen its strongest sales during the holiday season. On average, they have seen year-over-year growth of over 0.2%. It's anticipated that the retail sector will see a 3% to 4% gain (or $960 Billion in sales) during the 2023 Holiday Season.  

So what is driving this optimism?

First, we have to look at the employment numbers. Despite the number of layoffs, total employment numbers have risen by almost 2% in 2023 when compared to 2022. Second, we look at disposable income. When adjusted for inflation, on average it's up by +3.5% in 2023. Finally, we look at the average savings, while down, is still in the positive. 

What it Means for Investors? 

A successful Holiday Season can make or break a business. Regardless, it's a win for investors as retail property has been going strong. 

In 2023; the average vacancy rate was at 4.6% while net absorption is almost at 6%. This also trickled over to industrial space as it has seen vacancy rates at 4.8% while net absorption rates are at 2%. At the same time, an additional 6% of new space has been added to the market. 

Overall; investors who own retail or industrial assets are going to have a very Happy Holiday Season. This however should not be seen as getting the green light to start buying retail or industrial property. One should speak to a market expert to see if it's wise to diversify by adding these properties to their portfolio. 

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