fbpx
Building Successful Relationships

Tag Archives: commercial real estate market


Gap Inc. to Close 350 Stores by 2023 as Clothing Retailer Retools Real Estate Footprint

Iconic retailer Gap Inc. said it would close 350 stores by 2023 across its namesake and Banana Republic brands, a decision that is expected to reduce its mall-based locations by an estimated 80%. 

The nation’s largest apparel retailer said Thursday at least 225 of those locations are expected to close before the end of the year, with an additional 75 closures scheduled for 2021. As the company pulls back on locations for its unprofitable brands, it said it plans to move forward with openings for its successful ones — Athleta and Old Navy — as the two steadily contribute a larger portion of the company’s total revenue.

The drastic changes to its brick-and-mortar footprint, which were announced at a virtual investor event, come as the San Francisco-based company scrambles to retool its real estate portfolio amid a yearlong slump in sales and the ongoing coronavirus pandemic. 

“We were overly reliant on low productivity, high-rent stores,” Mark Breitbard, Gap’s new president and CEO, told investors. “We will be shrinking our North America footprint and getting out of mall-based locations, and by 2023, we will have reduced our store fleet by 35%. The goal is to create a new operating model in a cost-effective way, and all of the changes will help us become a digitally-led brand.”

Gap Inc. oversees brands including Gap, Banana Republic, Athleta, Old Navy, Janie & Jack, and Intermix. Its latest announcement is the retailer’s most aggressive push in its decades-long history to shift its Gap and Banana Republic business away from brick-and-mortar stores. The company had been struggling long before the pandemic against steep revenue declines, rising e-commerce competition, and declining mall traffic, which sent the number of Gap and Banana Republic stores nosediving over the past half-decade.

The company has shrunk Gap and Banana Republic’s footprint to what is expected to be fewer than 1,420 by this year’s end, from 1,843 stores in 2018. At the beginning of this year, the company had planned to close 90 Gap and Banana Republic locations. 

The firm’s dramatic increase in closings for those brands is another sign of how much retailers nationwide are struggling right now. The industry is responding to the financial distress of the pandemic by cutting back on real estate expenses and closing locations at a pace that is expected to make 2020 a record year for store closings, according to a CoStar Market Analytics report on the national retail real estate market. 

Gap’s retreat from mall-based locations could be a hefty blow for retail landlords already struggling with declining foot traffic. 

The chain plans to use the current healthcare and financial crisis as a springboard for its real estate restructuring plans. 

Gap Inc.’s Chief Financial Officer Katrina O’Connell told investors that the brand had “not had great execution over the past several years,” but the company will use current market conditions to reallocate its fixed expenses in rent and shift its resources to the retailer’s growing digital operations. 

Retool, Reset Future Growth

In the early stages of the virus’ outbreak across the United States, the retailer said it was forced to push most of its business to digital operations as a result of lockdowns and in-store restrictions. Most of the company’s 3,000 stores have since reopened, but after reporting a 165% leap in e-commerce sales compared to last year, Gap Inc. plans to continue to shift most of its future growth to expanded digital operations. 

A majority of Gap Inc.’s anticipated closures will be timed with lease expirations, but the retailer estimates it will have to spend about $210 million to buy out some of those agreements. O’Connell said the company is also aggressively renegotiating lease terms for stores that will remain open, a move that will save the company about $45 million annually. 

“Lease buy-out costs and rent reductions are all specific to our real estate restructuring efforts,” the CFO said, adding that the company is also exploring whether it should exit the European market entirely or shift its locations there over to a franchise model. 

But the company’s plan to shrink its real estate costs has already hit a few brick walls. The company has been tangled in several lawsuits over the past five months with prominent landlords including Simon Property Group, which is Gap’s largest landlord, and Brookfield over its rental obligations. Simon is suing for $65.9 million in unpaid rent and has countersued Gap’s request for renegotiated rental terms for “taking opportunistic advantage” of the coronavirus’s devastating economic effect.

Gap’s store closure roadmap has already resulted in permanently vacating its 29,043-square-foot San Francisco flagship at 870 Market St. Back in August, the company confirmed it had emptied more than 47,230 square feet of retail space in the city after closing the flagship as well as other locations at the outdoor Embarcadero Centre and indoor Stonestown Mall

Gap Inc.’s shift from physical space to stronger e-commerce growth will coincide with another transition over the next three years: Old Navy and Athleta’s increasing prominence as the company’s most profitable brands. 

Since the pandemic’s outbreak in March, Old Navy has benefited from customers looking for lower price points, while Athleta’s athleisure and loungewear clothing has fueled the brand’s plan to more than double its current $1 billion in annual revenue by 2023. 

Shawn Curran, the retailer’s chief operating officer, said Thursday that the company would be shifting its brick-and-mortar footprint to more Old Navy and Athleta locations over the next several years. By 2023, the two companies will make up about 70% of Gap Inc.’s total revenue, a significant increase from their current 55% annual contribution. Revenue from all of the company’s brands last year totaled $16 billion. 

While the pandemic has slowed down Old Navy’s store expansion plans, the brand expects to open about 30 to 40 new stores each year through 2023. It currently operates about 1,200 locations. 

“Stores matter and will remain an important underpinning to our business,” Old Navy CEO Nancy Green said, adding that “current market conditions will slow the brand’s opening pace. We’ll target new stores in smaller markets as an alternative to big-box competitors, and opening in smaller markets will minimize cannibalization of other locations.”

Athleta, which currently operates a “highly profitable fleet” of 200 stores,” will also continue to expand its brick-and-mortar footprint. 

Mary Beth Laughton, the brand’s CEO, didn’t include details as to where and how many, but said physical locations were “top customer acquisition and brand-awareness vehicles that serve as an important role in local communities,” adding that the brand has an “under-penetrated real estate footprint.”

*Article Courtesy of CoStar

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Despite Bleak Near-Term Outlook, Philadelphia Economy Should Survive Coronavirus

The coronavirus spread has reintroduced factors absent from in the national and Philadelphia commercial real estate markets economy for almost a decade: widespread fear and uncertainty.

As we are early in the onset, and short on government data points collected after the virus’ spread, any market analyst in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space –  worth his or her salt will admit there will be a deluge of question marks hanging over the economic outlook during the next month or two.

However, it’s still constructive to take stock of what we do know, in order to build up as clear a picture of the road ahead as possible for U.S. and Philadelphia commercial real estate listings.

This CoStar Realty Information Inc. report involving U.S. and Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

First off, a painful near-term decline in Philly’s economic figures in relation to national and Philadelphia commercial real estate properties is all but certain for this spring. To curb the virus’ spread and prevent hospitals from being overwhelmed with patients, Pennsylvania and New Jersey governors both ordered all nonessential businesses to close on March 16.

How long are these monumental measures likely to stay in place? China’s aggressive lockdown measures lasted about two months. The CDC recently recommended cancelling or postponing any gatherings of 50 scheduled through mid-May. Johns Hopkins University School of Medicine’s infectious disease expert Morgan Katz expects meaningful improvements by early May.

Meanwhile, Treasury Secretary Steven Mnuchin is at the center of the White House’s economic response to this crisis and says Republican senators’ proposed Coronavirus Relief Bill, now under debate in the Congress, aims to cushion businesses for 10-12 weeks of serious disruption. That would take us through early- to mid-June.

Regardless of how long these shutdowns last, the leisure/hospitality sector and retail trade sectors in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – will likely be some of the worst-affected major industries. They represent 10 percent and 8 percent of Philadelphia total employment, respectively.

Hit by department store closures and the shift to automated or online checkout, Philadelphia’s retail employment already was on the decline before the onset of the virus. Considering how many national retailers’ balance sheets had already been eroding prior to the onset of this crisis, the road ahead looks like a painful one for the retail markets related to national and Philadelphia commercial real estate listings.

Leisure and hospitality employment, supported mostly by restaurants, bars, and hotels, had been one of the metropolitan area’s fastest-growing employment sectors. Center City’s blossoming nightlife has been a key ingredient to Philadelphia economic revival over the past 15 to 20 years. The fact that the industry is now at such high risk is probably the biggest existential threat posed by the coronavirus to Philadelphia’s ongoing revival.

But overall, the coronavirus and its accompanying economic shock do not pose major threats to the fundamental drivers of Philadelphia’s economic renaissance over the past 15 to 20 years.

Philadelphia’s industry mix positions it better than most major U.S. cities to weather the negative economic impact of the coronavirus. Very few major U.S. markets have higher concentrations of the sector including healthcare, professional and business services which will likely remain most resilient in the months ahead.

Meanwhile, Philadelphia has relatively lower concentrations of the sectors now most at risk such as leisure and hospitality, retail and oil and gas extraction.

The city’s status as a powerhouse of healthcare innovation only gains renewed importance as a result of the current tragedy and will be a key economic benefit as the number of U.S. residents aged 70 and older grows by 40 percent over the course of this new decade.

Meanwhile, the cost of living differential between Philadelphia and its nearby competitors, New York, Boston and Washington, D.C., remains massive. Philadelphia will continue to attract large net inflows of college-educated young adults moving from these places in search of more spacious housing and higher savings/disposable income.

In other words, for firms able to remain on offense during what will undoubtedly be challenging months ahead, Philadelphia remains an attractive destination for real estate investment capital seeking stable long-term growth, especially when stacked against other major metropolitan areas in the U.S. uncertainty. – By Adrian Ponsen, CoStar Analytics.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

U.S. Economy Records Another Month of Job Growth

For the second month in a row, U.S. firms active in the national and Philadelphia commercial real estate markets blasted past hiring expectations, adding 273,000 net new jobs in February according to last week’s national employment report released by the Commerce Department.

The unexpectedly strong report, culled from a variety of corporations in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space –  was further bolstered by revisions to December and January payroll data that added an astounding 85,000 jobs in those months combined, bringing the three-month average job gain to 243,000 per month, a rate not seen since September 2016. Meanwhile, the unemployment rate ticked back down to its 50-year low of 3.5%.

This CoStar Realty Information Inc. report involving U.S. and Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The survey of employers related to U.S. and Philadelphia commercial real estate listings used to compile this data was administered in the second week of February before it became apparent that the coronavirus outbreak in China had spread throughout much of the globe, including the U.S. A potential preventative vaccine is at least a year or more away, according to health officials, and therapeutic treatment remains uncertain and probably won’t be available until late spring at the earliest.

To avoid widespread transmission, factories in China and other Asian nations had halted operations and workers were isolated or quarantined. Several nations have closed their borders to visitors from impacted areas, and many national and international companies involved with national and Philadelphia commercial real estate properties now are restricting business travel.

This has led to interrupted supply chains for manufacturers serving the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space and a drop-off in demand for transportation services as well as travel and tourism-related services. In the U.S., as people avoid large public gatherings and events, leisure and hospitality, live entertainment and retail sectors are likely to be impacted.

While the economic impact of the virus remains unknown, the February jobs report offers insight into the underlying strength of the labor market before impacts from the virus begin to be reflected in the economic data related to national and Philadelphia commercial real estate listings. This may suggest the economy’s resilience amid continued uncertainty. – By Christine Cooper, Managing Director and Senior Economist for CoStar Market Analytics, Los Angeles.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Grocers, Gyms, Discount Apparel Keeping Philly Retail Space Market Afloat

Store closures reached a record-high nationally in 2019, and the Philadelphia commercial real estate market was not spared from the fallout.

Sears and Kmart alone shuttered eight stores in the Philly retail space market, resulting in 1 million square feet of new retail vacancy. Market-wide net absorption, the difference between move-ins and move-outs, ended the year slightly in the red.

This CoStar Realty Information Inc. report involving Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The latest Philadelphia retail market video update from Adrian Ponsen at CoStar Analytics examines these trends in more detail to help investors understand the challenging and fast changing retail market they face in 2020. Please click here to view the video.

Market trends in the Philly retail space market, however, would have been far worse if not for the range of tenants that faced less pressure from Amazon and continued to expand.

More than 12 new grocery store locations opened in the Philadelphia area last year, along with several new fitness centers. In addition, discount clothing retailers, such as Burlington, Marshalls, TJ Maxx and Old Navy, also continue to grow their store counts in the Philly retail space market. Despite competition from online clothing sellers, many budget-conscious shoppers still find that it’s simply quicker and more cost effective to visit brick-and-mortar locations and try clothes on, rather than ordering online and risk having to make returns.

For more information about Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly retail space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly retail space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Retail Pop-Ups Evolve as Landlords Seek Fresh Appeal

The bright neon sign declares “You are magic!” as a room fills with a rainbow of lights activated by a couple, Jaime Martinez and Cristina Cave, clasping hands while touching sensors.

The two wriggle their bodies and twist their arms up, activating more lights, all while a camera behind them discreetly snaps photos of their colorful dance. Within minutes, the camera creates an Instagram-ready graphic that is emailed to their inbox for social media sharing.

Cave and Martinez are among hundreds of people who visited Color Factory, an interactive pop-up art exhibit in a former 20,000-square-foot furniture store in Houston on a recent winter afternoon. Families, couples, and children crowded the sold-out exhibit that day, jumping into the NASA-themed plastic ball pit, drawing on walls with three-foot long blue pens, munching on macarons and mochi ice cream, and sniffing works of art that have been infused with scents of freshly cut grass and butter popcorn.

Color Factory represents an increasingly important new breed of retail tenant that could provide one answer to the struggle retail property owners in national and Philadelphia commercial real estate markets have as they search for ways to lure in customers as online shopping grows. So-called pop-up shops, defined because they have temporary leases, have been around for years mostly as seasonal retail strategies around Halloween or Christmas.

This excerpt from a CoStar Realty Information Inc. report by Marissa Luck involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

This new wave of pop-up stores in the U.S. commercial real estate market – including Philly retail space – is a radical departure from the traditional seasonal model, and they are breaking into hybrids, according to a recent report. Many of the concepts like Color Factory don’t even bank on selling visitors goods and instead rely on admission costs and social media attention for their bottom line.

Pop-up retail is estimated to be a $50-billion-and-growing industry in the U.S. commercial real estate market – including Philly retail space – and, according to industry sources, the number of pop-ups in New York City doubled in 2019 and is now right around 200.

The pace of the pop-up boom among national and Philadelphia commercial real estate properties is expected to continue in 2020. Experts expect pop-up leases to further entrench themselves in major metropolitan cities and expand out across the country into more medium-sized cities. Though temporary in nature, the pop-up lease could become a permanent piece of commercial real estate, though the form is changing.

The rise in pop-ups is a response to the retail apocalypse as a record number of storefronts close amid changing consumer habits and the rise of online shopping, leaving millions of square feet of retail space vacant across the country. While pop-ups aren’t expected to be the solution to the rising tide of retail vacancies, they do represent an increasingly innovative way for landlords to generate income and create foot traffic at a property. – By Marissa Luck, CoStar Realty Information Inc.

For more information about Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philly retail space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly retail space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

New Census Figures Show Rise in College Educated Renters in Philly

Just before the start of 2020, the U.S. Census Bureau released a treasure trove of its most recent demographic data from 2018.

While the census’ data releases are slightly dated, the bureau still provides far and away the most granular insights available on changes in long-term demographic trends that offer a view of the national and Philadelphia commercial real estate markets.

For the U.S. commercial real estate market – including Philly retail space – one of the most important takeaways from the recent release was the continued surge in Philadelphia’s population of college-educated renters.

This CoStar Realty Information Inc. report involving U.S. and Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The year-end tally of overall renter households in Philadelphia County wasn’t particularly noteworthy. At 287,500, the figure was almost unchanged compared to 2013 levels. (See Chart “New Households Moving into Philadelphia County”)

But the slow-growing headline masks dramatic changes in the demographic makeup of Philadelphia’s renter population. With rents having risen for 10 years straight, low income renters are being priced out of Philadelphia at an alarming rate.

The number of renter households without a college degree declined by almost 20,000, or 13 percent over the past five years, more than 10 times the national rate of decline in this cohort. Conversely, the number of renter households with bachelor’s or graduate degrees jumped to 97,000 in 2018, an acceleration over the 5.4 percent annual growth the figure has averaged during the past five years. (See Chart “Renter Households With Bachelors Degrees or Higher”)

In line with these shifts, Philadelphia’s share of renter households earning over $75,000 has now doubled from 10 percent in 2010 to 21 percent in 2018, with most of the gains accruing during the second half of the decade. (See Chart “Percentage of Renter Households Earning $75K+”)

Why is Philly experiencing such rapid growth in high income renters? Increasing affordability barriers to homeownership (which will be covered in a future Costar Research update) are keeping more high-income residents living near U.S. and Philadelphia commercial real estate listings in the renter pool well into their 30s.

However, even greater affordability challenges in nearby New York and Washington, D.C., are sending residents to be closer to national and Philadelphia commercial real estate properties. As housing costs have skyrocketed in those locations during recent years, the number of college-educated migrants arriving in Philadelphia annually has grown by more than 50 percent since 2012.

This influx has been offset by Philadelphia’s continued losses in low- and middle-income renters. Census data suggests that in many cases, these renters are moving to some of the lowest-cost corners of the Philadelphia metropolitan statistical area, including Delaware County, Pennsylvania, and New Castle County, Delaware, which both saw their tallies of non-college educated renters rise by more than 4,000 over the past five years. However, others continue to leave national and Philadelphia commercial real estate properties seeking the mix of lower housing costs and better blue-collar employment prospects offered in the southern U.S. (See Chart “Total Renter Households”)

The overarching takeaway from the 2018 census release is that while Philadelphia’s renter population is growing more slowly than it was five years ago, it continues to gentrify at a rapid pace – By Adrian Ponsen, CoStar Realty Information Inc.

For more information about Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly retail space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly retail space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

 

Share

Job Growth, Consumer Spending Bode Well for CRE in 2020

The longest economic expansion since World War II in the national and Philadelphia commercial real estate markets shows indications of staying solid in 2020, extending the record bull run for U.S. commercial real estate despite some risks that could eventually move the country toward a recession, according to CoStar economists.

Trade wars and a slowdown in the U.S. manufacturing sector as well as around the globe last year roiled equity markets and rattled businesses in the U.S. commercial real estate market – including Philly retail space, CoStar economists say in the “2019 Year in Review of the U.S. Economy” video (available by clicking here). This robust job growth has, the CoStar experts said, extended the spending power of American consumers, the heart of the nation’s economic engine.

This CoStar Realty Information Inc. report involving U.S. and Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

“Our growing economy still bodes well for demand for commercial and multifamily real estate,” said Christine Cooper, managing director and senior economist from CoStar’s Los Angeles office. “Expanding payrolls will continue to fuel demand for office space, while rising incomes and consumption will boost demand in industrial and retail sectors. As job growth continues, consumers appear quite optimistic and unconcerned by the trade war and any economic slowdown abroad.”

Trade tensions caused markets dominated by U.S. and Philadelphia commercial real estate listings to swoon, resulting in distress and uncertainty for businesses dealing with disruptions to their supply chains and higher costs. That made firms cautious in their plans for expansion and private business investment, which has been slowing since mid-2018, said Galina Alexeenko, managing director and senior economist from CoStar’s Atlanta office.

“The business sector’s mood soured in 2019 as uncertainty reigned, costs rose, profit margins compressed and earnings growth slowed,” Alexeenko said. “Falling exports and the pullback in business investment have been a drag on economic growth.”

Migration of workers from the Northeast and Midwest – as well as throughout national and Philadelphia commercial real estate properties as well – continued to bolster surprising strength in labor markets, with job growth fueling real estate demand in the South and U.S. West, said Alexeenko. The Federal Reserve Bank faced rising trade uncertainties, slowing inflation and a global economic slowdown, the analysts said in the video.

“Going forward into this new decade, we expect economic growth to slow somewhat as the labor market cools, consumer spending loses some momentum and persistent global and trade policy headwinds weigh on business sentiment and investment,” Cooper said. – By Randy L. Drummer, CoStar Realty Information Inc.

For more information about Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly retail space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly retail space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

2019 U.S. Office Investment, Leasing Shatters Records

Demand for U.S. offices throughout national and Philadelphia commercial real estate markets set a post-recession record in 2019 as companies and real estate investors set aside concerns about a slowing global economy and snapped up workspace.

The average U.S. office vacancy rate matched a post-recession low of 9.7 percent and office sales and leasing set new records in 2019 in the U.S. commercial real estate market – including Philly retail space, CoStar economists say in the “2019 Year in Review of the U.S. Office Market” video (available by clicking here). This should result, they say, in strong demand and performance through at least the middle of this year as technology companies like retailer Amazon and iPhone maker Apple move into new offices.

This CoStar Realty Information Inc. report involving U.S. and Philadelphia commercial properties is being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Led by about 8 million square feet taken by shared-office provider WeWork, total signed leases among U.S. and Philadelphia commercial real estate listings increased to a record 360 million square feet in 2019, and the total could rise by another 100 million square feet as CoStar researchers wrap up data collection for the year, said John Affleck, CoStar’s vice president of market analytics. WeWork is expected to scale back in 2020 after it scrapped an initial public offering and replaced its CEO in 2019.

About 160 million square feet of office space is under construction, roughly 2 percent of the nation’s total office supply, with Austin, Texas; Nashville, Tennessee; and San Jose in California logging the most building activity. Expanding tech firms such as Salesforce and Pinterest have snapped up space for future growth, signing leases for national and Philadelphia commercial real estate properties even before buildings receive development approval, said Mike Roessle, director of U.S. office analytics for CoStar Group.

“It’s surprising that large tenants are finding available space in such a low-vacancy rate environment,” Roessle added.

While average rent growth decreased in 2019, it ended the year at an average 1.8 percent. CoStar expects those trends to continue in 2020, forecasting 1 percent average annual rent growth from this year through 2024, Roessle said.

Despite rising concern about the possibility of a global recession, investors shelled out more than $130 billion to buy buildings last year, a figure that could approach $150 billion as CoStar’s researchers finish collecting deal information. That would be the highest total since 2007, the peak of the previous real estate boom.

Office investment in New York City was down significantly while sales in Seattle, San Francisco and other tech-focused markets increased last year, Affleck said. – By Randy L. Drummer, CoStar Realty Information Inc.

For more information about Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly retail space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly retail space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Mixed Messages Cloud the View Toward Clarity in Economic Policy

Analysts had hoped to get some clarity in the past week on both monetary policy and fiscal policy fronts. Instead, with all the recent announcements, reversals, and delays related to trade deals, there were many moving parts with which to contend.

On the monetary policy side, the Fed formalized its intent to keep interest rates in the U.S. economy – along with national and Philadelphia commercial real estate markets – steady for the foreseeable future. This was largely expected, though some comments by Federal Reserve Chairman Jerome Powell suggested an interesting shift in the committee’s mindset over the previous year.

In his most recent press conference, Powell said “even though we’re at 3.5 percent unemployment, there’s actually more slack out there.” And then later, “I like to say the labor market is strong. I don’t really want to say that it’s tight.”

This CoStar Realty Information Inc. report from Robert Calhoun and Matt Powers involving economic issues as they relate to U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The suggestion by a Fed chairman that 3.5 percent unemployment affecting, among other segments of the economy, the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – doesn’t represent maximum employment would have seemed crazy even just three or four years ago and would have been met with incredulity.

We know that to be true because in June of 2016, then-Fed Governor Jerome Powell said, “The unemployment rate has fallen from 10 percent to 5 percent, close to the level that many observers associate with full employment.”

We should congratulate the Fed for being humble about its ability to estimate something unobservable like full employment. You can’t see full employment, but you will know it by its fruits. Those fruits are rising wages and rising inflation.

November’s consumer price index showed little risk of an undue rise in inflation any time soon. While the monthly increase in the core consumer price index (excluding food and energy) was double that of October, the year-over-year increase remained at 2.3.

The Fed bases its inflation target on a measure known as personal consumption expenditure, which tends to run lower than the index due to differing weights. As the core index was most recently 73 basis points above core expenditure, this week’s inflation data suggests that the Fed should continue struggling to meet its inflation target and its resultant effects on U.S. and Philadelphia commercial real estate listings.

As for future wage growth, that depends on continued hiring. Earlier in the week, we got more information on the health of the labor market in the form of the National Federation of Independent Business’s survey. Widespread small business sentiment – as well as the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – appears to have rebounded from uncertainty-driven declines over the last few months.

Plans to increase both capital spending and hiring rebounded strongly, reversing declines that were looking worrisome. The reason for the improvement appears to be better November sales, with more firms reporting an increase in sales than a decline.

Firms were already seeing improvements even before this week’s improved clarity on the outlook. The survey questions about labor tightness and wage growth involving national and Philadelphia commercial real estate properties showed meaningful upticks as well. Given such low recent levels in sentiment across the board, we have been expecting a slowing in growth. While this is still likely, as seen in Friday’s weaker retail sales figure, the most recent small business report says maybe we’ve found a floor.

Last week also provided needed clarity from the fiscal side after weeks of conflicting reports. On Tuesday, the Democrats and Republicans came to an agreement on revamped language for a U.S.-Mexico-Canada trade deal. On Thursday, the U.S. and China reportedly finally agreed to terms on “Phase One” of their trade deal, two months after it was initially reported to be agreed on.

Later is better than never, with the deal reported to call off the planned Dec. 15 tariffs and cut the Sept. 1 tariffs in half. While some details are still lacking and there is no guarantee of further progress, the worst case has been averted. Much like with the Fed, there appears a reduced chance of this issue forcing the U.S. into recession and influencing national and Philadelphia commercial real estate listings. construction. (Robert Calhoun is a managing director and senior economist and Matt Powers is associate director of market analytics for CoStar Market Analytics in New York City.)

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Are Retailers’ Earnings Reports Telling Us Something?

 “After seven consecutive quarters of comparable sales growth, we experienced a deceleration in our third-quarter sales,” – Macy’s CEO Jeff Gennette in a statement accompanying the retailer’s most recent earning release.

Retail has been the big story these past few weeks as many publicly traded companies reported earnings for the third quarter. The tone was … not positive.

Macy’s stock fell 11 percent during the week after reporting the first decline in sales in nearly two years. Home Depot dropped 8 percent after a sales miss. Kohl’s fell by 19 percent, missing significantly while also lowering its outlook. Urban Outfitters fell by 19 percent. Nordstrom fell 10 percent. Only the Target and the TJX Companies – owner of discounters TJ Maxx, Marshalls and HomeGoods – saw their shares rise after each reported a strong quarter.

It is well established by now that the U.S. economy – along with national and Philadelphia commercial real estate markets – are heavily dependent on the consumer, so how worried should we be about the red flags waving in these retail earnings reports? Is this what a strong consumer looks like? The story feels like it is about more than just shoppers shifting to online spending.

This CoStar Realty Information Inc. report from Robert Calhoun and Matt Powers involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Consumer spending in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – is ultimately built on the foundation of a strong labor market. While we continue to see job growth and low unemployment nationwide, cracks could be starting to show. We have seen job openings decline in recent weeks, and now it seems employers could also be actively laying off more workers. Weekly claims for unemployment insurance rose to 226,000 last week. While still very low from a historical standpoint, claims are up 15,000 in just two weeks.

Weakness in employment appears to be regional, focused largely on the Midwest and some scattered Northeast and Western states. However, the South remains the healthiest region. Every single state in what the U.S. Census Bureau defines as the South – except Maryland and Oklahoma – continues to see jobless claims fall. The economy in Oklahoma is much more heavily dependent on oil than other states (8 percent of employment versus only about 0.5 percent nationwide), so it has seen jobless claims rise as oil prices have declined from 2018 highs. And Maryland really isn’t even in the South, right?

This regional divergence in jobless claims seems largely driven by prolonged weakness in the manufacturing sector, on which Great Lake states are reliant. Manufacturing accounts for roughly 17 percent of that region’s gross domestic product compared to 11 percent in the U.S., including U.S. and Philadelphia commercial real estate listings.

It has been noted earlier that increased uncertainty causes a decline in business activity in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – as well as a decrease in hiring. It also typically signals a slowdown in firing, as decision-makers wait to see how events such as the trade war situation play out. Is this dynamic beginning to change in a worrisome way?

That is hard to say, but if it was, you would see it first in the areas of the country that are most at risk from the trade war, and it appears as if that could be happening.

Fortunately for the economy, the consumer isn’t the only game in town. Housing continues to buck the otherwise weakening trend in most areas of the U.S. economy, with more strong data out this past week, especially involving national and Philadelphia commercial real estate properties.

The National Association of Home Builders’ Housing Market Index posted one of its best figures since the last recession in its November report. The portions of the survey that asks homebuilders their thoughts on current sales, sales over the coming six months, and foot traffic of prospective buyers all have substantially improved in 2019.

Housing starts and permits also reported a leap in the Census Bureau’s October report. By “back-of-the-envelope” math, the rise in homebuilder sentiment and issuance pace of new permits is roughly equivalent to nearly a 1 percent boost to real GDP growth among national and Philadelphia commercial real estate listings. With no trade deal signed yet and wavering hiring indicators, that 1 percent becomes essential.

Meaningful regional divergence also can be seen in homebuilding activity: The Midwest is seeing declines in new building permits while the South leads the way on new construction. (Robert Calhoun is a managing director and senior economist and Matt Powers is associate director of market analytics for CoStar Market Analytics in New York City.)

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Big-Box Store Landlords See Signs Shoppers Still Spending

Some big-box store and mall owners in both national and Philadelphia commercial real estate markets are releasing sighs of relief: Consumers still are spending and could keep that up throughout the crucial holiday shopping season and into 2020, lifting any concerns of an immediate acceleration in store closings.

Peering into the earnings results of some the nation’s predominant big-box discounters like Target and TJ Maxx can offer a sense the economy and consumer confidence in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – will stay strong, at least for now.

That’s been a much-talked-about topic recently in U.S. and Philadelphia commercial real estate listings circles as investors awaited earnings reports they hoped would shed light on the current state of an industry evolving quickly to balance in-store and e-commerce sales as well as its brick-and-mortar footprint.

This CoStar Realty Information Inc. report from Jennifer Waters involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Store closings across the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – have been at a record pace, causing owners, investors and lenders to watch retail earnings reports closely to see if any slowing demand could mean more closings and empty store property on their hands.

Even with results that fell short of some of Wall Street’s expectations, retailers repeated the same song: the economy is still ticking away, and consumers still are in good shape. Of course, many of these retailers in national and Philadelphia commercial real estate properties remain focused on keeping their costs low, which can help lure shoppers into stores. The harder test is faced by the department stores that offer more expensive items and are reporting earnings results later this week.

But for the lower-cost sellers, the healthy results came despite the Commerce Department’s October sales report, which showed a reduction in spending tied mostly to vehicles and gasoline sales, two volatile segments. Skipping over those, spending rose, albeit at a speck of 0.1 percent, but analysts mostly have disregarded those factors as outliers.

Target, for example, exceeded earnings expectations with results that buttressed its strategy of providing consumers with unique items. The Minneapolis-based chain introduced new apparel brands, a proprietary grocery brand, and opened 25 mini Disney stores last month at competitive prices.

TJ Maxx, the parent of its namesake stores as well as Marshalls, Home Goods, and Home Sense in Canada, also reported robust results and plugged its forecasts. For TJ Maxx, for example, the wave of store closings has been a boon to the company’s business model of purchasing leftover inventory and selling it at reduced prices.

There are exceptions, such as J.C. Penney and Kohl’s, which are scrambling for ways to keep their brands relevant, according to analysts. While big-box and mall owners with national and Philadelphia commercial real estate listings continue to keep an eye on those retailers, they can rest assured that consumers are still opening wallets as job growth continues to keep unemployment at low levels. – By Jennifer Waters, CoStar Realty Information Inc.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Lower Inflation Figures Reflect Slowing Rent Growth

Recently released October consumer inflation numbers indicate less upward pressure on prices throughout national and Philadelphia commercial real estate markets, largely driven by weaker growth in housing costs, including slowing rent growth. The weaker inflation report comes after the Federal Reserve has already cut interest rates three times this year, in part to boost inflation closer to its target.

The slowdown in rent growth reflected in these lower inflation figures in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – is consistent with the trend in CoStar data on apartment rents, which have decelerated to around 2.6 percent today from above 3 percent in recent quarters.

This CoStar Realty Information Inc. report from Robert Calhoun involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

According to the Bureau of Labor Statistics’ data, the consumer price index, which measures the price Americans pay for consumer goods and services, increased 1.8 percent in October compared to a year earlier. A meaningful increase in energy services and gasoline prices affecting U.S. and Philadelphia commercial real estate listings drove the slight uptick from the 1.7 percent increase seen in the previous month.

The core consumer price index, which excludes volatile food and energy prices and is a better measure of underlying inflation pressure, slipped to 2.3 percent year over year, down from 2.4 percent in September. The resultant decline in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – was largely driven by housing-related costs.

The shelter costs among national and Philadelphia commercial real estate properties account for roughly one-third of the consumer price index and nearly half of the core index. While government figures show rent for primary residences growing at 3.7 percent from a year ago, month-over-month rent growth decelerated to just 0.1 percent. This is the slowest growth in more than eight years.

Goods inflation, excluding food and energy, slowed somewhat in October as well. Apparel prices were the primary cause. While they are very noisy, the month-over-month decline of -1.8 percent represents the third-largest drop in apparel prices since at least 1947.

Prices for goods may see upward pressure going forward because of higher tariffs on imports from China and a recent decline in the foreign exchange value of the U.S. dollar. Continued strength in the labor market and wages concerning national and Philadelphia commercial real estate listings should allow retailers to pass on much of the expected price increases through to consumers.

Households in the U.S. spend three times as much on services as on goods. Despite slowing shelter costs, services inflation rose slightly in October to 3 percent. The cost of medical care services has been rising dramatically in recent months and now stands 5.1 percent higher than a year ago. Unemployment among healthcare practitioners and technicians is currently just 1.1 percent, which could be pushing up the cost of such services.

This report is not likely to change the central bank’s current stance on interest rates, at least for now. Although inflation is not trending in the direction the Fed would like, the Federal Open Market Committee indicated at its meeting in October that it intends to hold interest rates steady as it monitors incoming data. (NOTE: Robert Calhoun is a managing director and senior economist for CoStar Market Analytics in New York City.)

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Share

Share

Share