Despite increased consumer spending, unemployment remains high and a depressed housing market, with high foreclosure rates and nearly one out of every four mortgages being "upside down" in debt-to-value ratio, threaten to slow economic recovery. Even with the better than expected numbers from March, retail sales are still below what they were two years ago.
Retailers will need to see a few more quarters of sustained growth in demand before we can expect any significant expansion. First quarter numbers show retail vacancy in the Tampa/St. Petersburg market increased to 7.7%, comparable to the national rate of 7.5%. The area had a negative absorption of nearly 553,000 SF of retail space during the first quarter of 2010, with approximately 23,000 SF of new space entering the market. Currently, over 138,000 SF of retail space is under construction in the Tampa/St. Petersburg market - only 30.8% of which is pre-leased.1
As long as retail demand continues to grow, the manufacturing sector will need to increase production. Output of consumer goods rose at an annual rate of 4.9% in the first quarter of 2010 2 and seven out of ten indicators helped spur an overall increase in the leading US economic index.3 Contributing to the rise was the interest-rate spread, increasing factory hours, slower supplier deliveries, rising stock prices and an increase in building permits.
Manufacturing has been expanding steadily in 2010, with employers adding over 45,000 positions in the first quarter. Increased production is expected to stabilize demand for industrial space and vacancy rates are expected to edge up to just over 12% by the end of 2010.4
Although tempered by high unemployment and weak construction spending, this growth in retail and manufacturing gives consumers cause for hope. According to Michael Feroli, chief U.S. economist at JP Morgan Chase & Co., “the momentum is carrying on into the second quarter as well. Capital spending, which was already strong at the end of the 2009, is continuing into this year, and that’ll support the recovery.”5
1 CoStar Retail Report 1st Quarter 2010 Tampa/St Petersburg Retail Market. The Costar Group. 2010
2 Industrial Production and Capacity Utilization. The Federal Reserve Statistical Release. Federal Reserve. April 15, 2010
3 The Conference Board’s index is a gauge of current economic activity, which tracks payrolls, incomes, sales and production.
4 CoStar Industrial Report 1st Quarter 2010 Tampa/St Petersburg Industrial Market. The Costar Group. 2010
5 Production Jumps as U.S. Factories Lead Recovery. Business Week. April 15, 2010