By Kate Snyder
As the holiday season gets into full swing, experts are anticipating that American consumers generally plan to keep their holiday shopping budgets in line with last year, although there will likely be a real difference in average budgets for low- and high-income shoppers, with those who earn less than $50,000 planning to spend significantly less and those who earn more than than $50,000 planning to spend more than average – particularly those who earn more than $200,000.
A U.S Retail Holiday Survey released by JLL, a commercial real estate services firm, outlined the differences in spending as well as other trends to expect, such as a majority of people making at least some in-store purchases this year, with the exception of deals – approximately 54 percent of those surveyed plan to shop Black Friday and Cyber Monday online. Other findings included in the survey were that more consumers planned to start their holiday shopping early, with more than half planning to start before Thanksgiving, while slightly more than 20 percent planned to start before Halloween. Almost one-third of affluent consumers planned to start shopping before Halloween.
Retail markets along the West Coast are also seeing the same kind of bifurcation that is projected for holiday shopping, with many cities seeing more growth in the most affluent areas. James Cook, JLL’s Americas director of retail research, said the cost of supplies has been a challenge in not only what retailers can stock for customers but also in new developments – new construction for retail, he said, is the lowest he’s seen in at least 20 years. Going into the holiday season, he is overall cautiously optimistic, and he noted that the market has been continuing to stabilize compared to the pre-pandemic climate.
“Going into COVID, the market had been relatively strong,” Cook said. “We’d been seeing absorption…so space was getting leased up nicely. COVID hit, we saw a bump up in vacancy, but since then, it’s been coming down quarter-over-quarter. So nationally, rents have been going up gradually and vacancy has been going down.”
In Southern California, experts are seeing similarities in several major regions and many described the bifurcation of the retail markets as “a tale of two cities.” Craig Killman, JLL executive vice president in San Diego, said the wealth in San Diego is along the coast, and those retail properties are in very high demand. Further inland, the retail market is relatively stable, but the tertiary assets in the more outlying communities are getting redeveloped. He believes the city is in good shape for retail and the holiday spending will reflect the same divide: high spending along the coast and less spending among the inland communities.
“San Diego’s a very interesting retail environment,” Killman said. “We never got overbuilt in San Diego because the barriers to entry throughout San Diego County are for the most part very high. We’re capacity-constrained with the ocean to the west, Camp Pendleton to the north, our mountains to the east and Mexico to the south. So we have a very finite amount of real estate down here in San Diego.”
Ben Lazzareschi, JLL managing director for the Bay Area, said wealthy customers are generally out and about, traveling more and being more social, and from that he expects to see some pretty strong luxury spending. However, he pointed out that some people and organizations are being priced out of the region and are leaving, which is making the area even more financially bifurcated. The concern is that behavior will ultimately transition into people leaving California altogether.
In Seattle, Francesca Howard, JLL vice president for Seattle, said there is a similar divide in household incomes, but most of the wealthier customers live not along the coast but east of Bellevue, which has been growing as a retail market hub alongside the region’s other core, downtown Seattle. With 10 million square feet of commercial space and another six million square feet in permitting or under construction, Howard said Bellevue is on track to nearly double its commercial space in the future. Much of what the area is seeing in terms of new retail includes services like day spas, natural wine bars and vegan restaurants.
“So the retail on the east side is very, very strong,” she said. “In terms of types of retail uses, what we’re seeing coming into town now are what I would describe as uses that are focused on ‘treat yourself.’”