2/27/2012 | By Carisa Chappell
While consumers recently took advantage of one of the country's top shopping holidays, Presidents' Day weekend, the retail sector continues to face a mixed outlook, according to industry experts.
Susan Persin, managing director with Trepp LLC, a commercial real estate consulting firm, said that although vacancy rates have improved from last year, they are still high by historical standards. She also noted that performance within the sector has varied widely according to property type and metro area.
"It's very location-specific," Persin said. "Some areas and property types are doing great and others are really struggling. The luxury and discount retailers are doing well, but the 'in-betweens' are having a more challenging time finding their niche these days."
Persin said shopping centers and regional malls have been the best-performing sub-sectors so far this year. Some of the best-performing retail markets include Boston, Houston, Miami and San Francisco, locales that have benefited from renewed job growth in sectors such as technology, energy and tourism, according to Persin.
The National Retail Federation (NRF) is attributing the strong start to 2012 to a strong November and December holiday shopping season, gift card redemption and unseasonably warm weather across the country. Jack Kleinhenz, NRF's chief economist, said an improving job market also helped lift consumer confidence in January.
Looking ahead, Persin said she doesn't foresee new retail construction starting back up soon.
"Retail tends to follow rooftops," Persins said. "We won't see a lot of new construction until we get the housing market to come back."
Instead, retail REITs will look to reposition existing assets and explore growth opportunities outside the United States, she said.
Despite the sector's current momentum, both Kleinhenz and Persin questioned how long it can be sustained.
"Consumer spending alone will not be enough to sustain economic growth or provide a strong foundation for consistent retail sales and growth. We must see improvements in key economic indicators, such as housing and employment," Kleinhenz said.
"With the stock market volatility, the European debt crisis and the overall uncertainty going on, I don't know if consumers will continue to have a huge amount of confidence," Persin said.