Retail Sales

Positive Spending at Necessity Retailers
Contrasts Overall Sales Momentum

Consumers prioritize food and personal care items. For a second consecutive month, total retail sales dropped; however, a pair of necessity-based categories continued to record gains. In March, health and personal care shops registered a third consecutive month of growth, with sales rising 0.3 percent. Meanwhile, grocery store purchasing increased slightly amid a decline in food at home inflation. The divergence between these two segments' performance and overall retail spending indicates consumers are placing a larger importance on essential goods and passing on big ticket items. Consumers that are still looking to make discretionary purchases may be spending online where discounts exist. Online pricing fell 1.7 percent year-over-year in March, with 10 of 18 major product categories noting declines.   

Recent spending trends strengthen single-tenant outlook. The performance of the grocery store and health and personal care categories during the first quarter has positive implications for net-leased property fundamentals. Entering April, vacancy in both the supermarket and drug store subsectors was in the low-2 percent range, with a net of more than 5 million square feet of grocery space absorbed over the past 12 months. This limited volume of available space, consumers' prioritization of necessity goods and an expected slowdown in construction are likely to preserve tight conditions across both segments over the near-term.