year, certainly aren’t enough to support a fully optimistic economic
outlook, especially when weighed against the potential disaster of
the fiscal cliff. But there are still a few reasons to be hopeful, it says.
“The greatest challenges to the economy are questions of policy
that can be shaped, determined and controlled,” says the
ChainLinks report. Another reason the company is optimistic is
related to underlying economic fundamentals. “It’s about the sec-
tor of the economy that led us into the recession initially and that
will likely finally lead us out—housing.”
New York City-based Faith Hope Consolo, chairman of the retail
leasing and sales division of Douglas Elliman, is also optimistic
about retail’s future. In a recent video interview, she told GlobeSt.
com editor Ian Ritter that “all reports are looking positive,” when
asked about what to expect at ICSC’s ReCon event this year. “Across
the country there are a lot of renovations of the malls and a lot of
new developments,” she said. “From the East to West coast, there is
activity in the market, and that is all very upbeat.”
But not everyone we spoke with is as convinced that things are
looking up. While some sources wonder if the national election
and job growth trends have done anything to improve consumers’
world views, many of them say it’s only a small piece of the puzzle,
with just a “marginal influence.” One of the factors with the biggest
long-term impact, some sources say, is payroll tax.
Chris Wilson, founder and chairman of Wilson Commercial
Real Estate, tells Forum that the grocery stores and retailers he
speaks with in the discount and promotional categories cite the
petual gridlock in Washington, DC has been around for a long time
now,” he says. “I do believe that consumer confidence continues to
improve, but it’s clearly more cautious.”
Like others who see a mixed bag of forces at work in shaping con-
sumer confidence, he points out that a slowly improving overall
economy and job market, rising house prices and a strong stock
market are obvious positive variables. However, the government’s
lack of urgency in solving some policy problems, and negative news
since the first of the year regarding budget issues, the sequester and
euro problems, remain a drag on consumer confidence, but that
could turn very quickly if those issues are resolved, he explains.
The retail market’s prospects depend largely on the direction
of consumer confidence. Yet there are more issues at play
than wage growth.
effects of payroll tax increases, rising medical costs and inconsistent energy prices among the reasons for declines in both consumer confidence and spending.
Wilson says that although working Americans are beginning to
feel more confident about their incomes and stability of employ-
ment, and some are even earning higher incomes, “We all know
people who continue to be unemployed or underemployed.”
The re-implementation of the payroll tax has directly impacted
take-home pay in the first quarter, so families and individuals will
have to assess how to factor this in over the months ahead, accord-
ing to Derek Layne, associate director at Stan Johnson Co. “It’s
hard to have increasing consumer confidence when the realities of
these figures are personally felt in middle America,” he says.
Jackie Baker, an associate director at Stan Johnson, points out
that although consumer confidence is rising, it’s at a slow pace.
“The national election didn’t have as much long-term impact on
consumer confidence as the 2013 increase in payroll taxes, which
have translated into weaker Q1 sales numbers for retailers,” she
says. “It feels like consumers are very cautiously optimistic and
would like to see government trim spending vs. additional tax hikes
that hit them in the wallet.”
Another who cites the slow pace of change in consumer confi-
dence is Los Angeles-based Alan Araki, managing director of invest-
ments at Primestor Development. “The results of the past US elec-
tion don’t appear to have had a huge impact on the overall consumer
confidence, since the frustration level with what appears to be per-
cated, with sluggish growth expected in North America and
declines across Europe. Emerging markets such as China and
Brazil are expected to be momentum markets this year.
CBRE Group Inc. says that the slowly rising consumer confi-
dence reflects a gradual improvement in fundamentals, and that
retail market fundamentals are trending in the right direction.
Still, factors other than fundamentals are in play. “The trajectory of
consumer spending growth has been tempered by political uncer-
tainties, particularly by ongoing federal taxation and sequestration
negotiations in Washington, DC,” say CBRE researchers. “Although
improvement in the housing market brought some much-needed
respite to consumer confidence levels—and, ultimately, retail
sales—at the end of last year, the prevailing political climate is
expected to be a continued hindrance to US economic expansion
through the first half of 2013.”
On the other hand, some local markets can expect the improve-
ment to continue. In San Francisco’s prime shopping district,
Union Square, for example, regional employment growth and a
strong tourism market have fueled retailer demand for space.
According to CBRE’s John Vitou, senior research analyst of the
Americas, educational attainment and wages in the region are sig-
nificantly above national averages. “High-tech employment in the
region has driven the recovery of the employment base,” he says.
“Total non-farm employment in San Francisco is expected to rise,
with nearly 35,000 new jobs to be created in 2013.” The longer-
term employment outlook for the region also remains bright, as