Retail Sales

Improvement in Core Spending
Reinforces Positive Outlook for Retail

Consumption tailwinds back demand for available space. Labor market resiliency, wage growth and easing inflationary pressures aided consumers’ spending power in April, supporting a 0.6 percent increase in core retail sales. Households concentrated their spending on essential goods and seasonal items during the month, generating sales growth across the health and personal care, building and gardening materials, and general merchandise categories. Consumers were also eager to spend more dining out, despite an increase in the price index for food away from home and a greater reliance on credit. Together, these spending trends have positive implications for retail space demand at a time when single-tenant vacancy is already historically limited, and multi-tenant vacancy is below pre-pandemic levels.   

Health a priority for both shoppers and retailers. The health and personal care segment was the only retail sector to record positive sales growth in each of the first four months of 2023, with spending up 7.9 percent in April. This performance is maintaining demand for available drug store space, with sector vacancy in the low-2 percent range. The rise in spending is also influencing retailers to broaden their offerings to capture market share. Dollar General has recently expanded into health care by carrying more over-the-counter medications and other health products. Meanwhile, Target is extending its partnership with Ulta Beauty, and Walmart grows its freestanding health center format.