|Outrunning a Recession
A near-term recession is possible, but recent economic data suggest the economy is staying ahead of it. The latest is the September retail sales report released this morning by the Census Bureau, revealing a seasonally adjusted 1.1 percent increase in total sales during the month and a 0.5 percent gain in core sales, which excludes autos and gas. Motor vehicles led with a gain of 3.6 percent. Other strong performers included clothing & accessories (+1.3 percent), food services & drinking establishments (+1.2 percent) and furniture & home furnishings (+1.1 percent).
There are casualties in the retail space, too. Tim Van Noord, our intrepid research manager in Grubb & Ellis’ Boston office, confirmed that the Good Newstand (sic) is no longer in business. On his way back to the office, Tim said he passed shuttered Borders and Barnes & Noble stores as well. But in search of good news, Tim ventured to nearby Cambridge, where Google just expanded by 60,000 square feet and Microsoft has announced an expansion. Tim says people are "opting out of print media and using smart phones, iPads and other devices to get their news in digital form."
Gap Inc.’s announcement that it will shutter a fifth of its namesake stores stands in contrast to the jump in clothing sales last month. Retail has long been one of the most competitive property sectors, and Gap’s problems are due mainly to overexpansion, merchandising missteps and aggressive competition.
Consumer spending, while not strong, has been enough to keep the economy afloat, which is important because it accounts for 70 percent of total GDP. The economy has been a factor in recent closings such as Borders and downsizings such as Gap, but the bigger factor has been aggressive competition from other retailers in the case of Gap and new technologies in the case of Borders.
Have a great weekend.
SVP, Chief Economist
Grubb & Ellis
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