Robust Holiday Retail Sales Bring Glad Tidings to U.S. Shopping Center Industry

by Alex Tostado

As 2018 wound to an end, the national unemployment rate hovered just under 4 percent, consumer confidence hit an 18-year high and wage growth reached a nine-year high.

Those positive economic signs helped set the table for a robust holiday shopping season, according to Cushman & Wakefield’s fourth-quarter snapshot of the U.S. shopping center market.

These three factors led to consumers spending more during the holiday season than in the previous six years. According to MasterCard Spending Pulse, U.S. consumers spent $850 billion during the 2018 holiday season, up 5.1 percent over the prior year. Online holiday sales from Nov. 1 through Dec. 19, 2018 totaled $110.6 billion, a 17.8 percent increase year-over-year, reports Adobe Analytics. According to Cushman & Wakefield, the convenience factor known as “buy online, pick-up in store” was more widely adopted this holiday season, growing at a year-over-year rate of 47 percent.

The report also found that the performance of non-mall shopping centers trended upward in the fourth quarter in the 66 markets Cushman & Wakefield tracks across the country. The vacancy rate for such properties finished at 6.3 percent, compared with 6.7 percent at the end of 2017. The average asking rent per square foot hit an eight-year high of $17.12.

Meanwhile, the report also found that construction activity is tapering. A total of 18.2 million square feet was added to the shopping center inventory in 2018, nearly 4 million square feet off the post-Great Recession pace from 2011-2018. At the end of the year, 14.4 million square feet of inventory was under construction.

Power Centers Rebound

Cushman & Wakefield reports that despite the closure of anchor stores affected by bankruptcies, the power center sector rebounded from the second and third quarters of 2018. Specifically, net absorption totaled nearly 408,000 square feet in the fourth quarter alone. Although there were some notable closures announced, such as Toy ‘R’ Us and Sears, the number of bankruptcy filings was down from 2017.

Nationally, the shopping center industry recorded 6.2 million square feet of positive absorption in the fourth quarter of 2018, compared with 14.2 million square feet in the same period a year ago. The New York City market and Dallas market led the way with just over 1 million square feet of positive absorption and 970,538 square feet, respectively. Philadelphia and St Louis were on the other end of the spectrum with negative absorption of 652,240 square feet and 331,175 square feet, respectively.

New York City also led the nation with 1.5 million square feet of inventory under construction at the end of 2018.

Cushman & Wakefield expects the positive economic trends to continue, although the shopping center sector may slow its production overall.

Authors of the report, researchers Garrick Brown and Pamela Flora, provide this cautionary note: “While economic trends and last year’s corporate tax cuts have bolstered most retailers, the basic underlying structural challenges faced by many retailers in certain categories still remain. With economic growth expected to continue well into 2019, the number of bankruptcies may diminish. This will give struggling retailers a short window in which to reinvent themselves and pay down debt obligations while right-sizing inventories and store portfolios. However, a weakening economy would exacerbate woes faced by struggling retailers and present even some of the healthier ones with new challenges.”

The report expects development to focus on redevelopments, particularly mixed-use projects. It also expects to see click-to-bricks — retailers that began online and are now creating brick-and-mortar locations — expand in 2019.

Download the full report at

— Alex Tostado

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