Retail Sector Strengthens As Consumers Return To In-Person Shopping

Consumer shopping habits were undoubtedly altered by the COVID-19 pandemic as more people purchased goods online to avoid coming into contact with people who may have been infected by the potentially deadly virus.

But as life returns to normal and inflation eases, consumers are again shopping at brick-and-mortar stores. Core retail sales increased 0.6% in April, according to research from commercial real estate firm Marcus & Millichap.

Don't miss:

• Closing the Wealth Gap: Investment Fund Delivers Impressive Returns To Its Investors And Tenants
• Elon Musk Is Bullish On Austin. Here's How To Invest In The City's Growth Before He Floods It With New Tech Workers

They’re spending more on health and personal care, building and gardening materials and general merchandise categories. They also are dining out more, despite an increase in the price index for food away from home and a greater reliance on credit.

Health and personal care showed positive sales growth in each of the first four months of 2023, with spending up 7.9% in April, according to Marcus & Millichap. Because health is a priority for shoppers and retailers, there’s plenty of demand for drug store space, with vacancy for the sector in the low 2% range.

The demand also is causing other retailers to increase their offerings. Dollar General, for example, recently expanded into healthcare by offering more over-the-counter medications and other health products. Target Corp. is expanding its partnership with Ulta Beauty with another 25 to 30 more new stores, and Walmart Inc. plans to open 28 Walmart Health centers in 2024, bringing its number of locations to 75.

Entertainment And Dining Out

Sales at restaurants and bars rose 9.4% year over year in April, with fast food and casual dining leading the sector. But consumers also are after an experience, which has companies like Topgolf and Puttshack opening more locations.

Consumer spending habits favor single-tenant properties. The segment started April with 10 consecutive quarters of positive leasing activity during which tenants absorbed more than 120 million square feet, according to Marcus & Millichap’s U.S. Single-Tenant Net-Lease Retail report.

Vacancy rates are now at a record low of 4.3%. Although that warrants an increase in construction, higher costs for materials, labor and capital have thwarted development, with single-tenant properties under construction accounting for just 0.5% of the pipeline.

Start generating passive income through real estate

Check out these featured investments from Benzinga's Real Estate Offerings Screener.

Read next: 

• Want To Grow Your Wealth Passively? These High-Yield Real Estate Notes Might Be Your Holy Grail
• How These Accredited Investors Pulled In Better Returns Than Warren Buffett