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US GDP Contracts By 1%, But Is It Ok?

April, 2014
by Karl Niehaus, President, CREI

Commercial Overview:

LARGE BIG BOX RETAILERS VANISHING as national tenants are not looking for new locations as they were in the past. Many operators, such as Borders, have shut down, or in the case of Best Buy, are downsizing. Aside from your largest retailers such as Walmart and Target, all other concepts have faded or evolved. The 40,000-square-foot retailers are becoming 20,000SF, and 20,000SF tenants are becoming 10,000SF. Restaurants and discount stores, however are doing very well. Even with rents rising retailers such as 99 Cents Only Stores, Marshalls and Ross Dress for Less are expanding. Given their success, they remain a good option for vacant boxes. Healthcare is playing a big role in the absorption of vacant space. Many property owners are consulting with real estate brokers to plan for the evolving retail market.

Economic Overview:

US GDP CONTRACTS BY 1%, BUT IS OK? It is the first downturn since 2011. Yet most economists see a bright future. The January to March period tends to be the slowest for growth. "This year, colder than usual weather stunted retail sales, international trade and the housing market." said Joseph Lavorgna, chief U.S. economist at Deutsche Bank. He predicts the economy will rev up, growing at more than a 4% pace in April through June. Stuart Hoffman, chief economist for PNC Bank also predicted, "The first quarter was disappointing, but rather than view that as an omen of a recession or the first of a down leg in the economy, I see the seeds of a big bounce back in spring", which is the good news for retailers and commercial property owners.

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