Consumers spend a lot on entertainment,
but they buy things, too
The retail sector continues to show losses from store closures. In the past third quarter, the national mall-vacancy
rate spiked to 9.1 percent, up from 8. 6 percent in the previous quarter. This was the largest one-quarter jump
The average rent at malls fell 0.3 percent — the first decline since 2011. The setback was largely due to the
closings of a number of Sears stores this past August. The historic retailer filed for Chapter 11 bankruptcy
protection in October of this year.
In the second quarter of 2018, the
neighborhood and community shopping-center vacancy rate increased from
10 percent to 10.2 percent due to the
closings of Toys R Us and Babies R Us.
In this past third quarter, the neighborhood and community shopping-center
vacancy rate held steady, but clearly,
the restructuring of the retail sector will
continue to affect the commercial real
Many cite e-commerce as the primary
reason for the structural shift. This is
partially true, but the changes in retail
also reflect how consumers spend their
Anecdotal data suggests that we are
spending more on services and entertainment, and less on things — consumer goods. But how do we measure this consumer shift if we only have retail-sales data on goods and restaurants?
A good proxy for consumer spending is employment in the industries that correspond to the consumer category.
Take restaurants, for example. The U.S. Census Bureau shows that restaurant sales increased 29 percent from
2012 to 2017, or 5. 8 percent per year over the five-year period.
At the same time, restaurant employment climbed 17 percent from 2012 to 2017, or 3. 4 percent per year.
Thus, sales grew at roughly twice the rate of employment growth.
The ratio is similar to retail sales that grew 16 percent from 2012 to 2017 compared to employment growth of
7 percent over the same period. The growth of retail sales less e-commerce registered at 14 percent from
2012 to 2017, compared to employment growth of 6 percent.
To get a sense of the dynamics of other forms of entertainment and how spending may have changed,
we tabulated employment gains and losses for various amusement categories, and the results are illuminating.
The numbers show strong growth in the fitness sector and declines in the tobacco and gambling industries,
suggesting that we are living healthier lifestyles.
At the same time, the data shows consumers are likely spending more on amusement and entertainment,
including fitness, and less on consumer goods — which are sold via retailers. This is not bad news for the
retail real estate sector, however, as we see increasingly more traditional gyms as well as niche gyms — such as
spin-class companies and yoga studios — occupying retail space.
Trampoline parks also are expanding as are other entertainment outfits. Some of these companies have filled
the spaces formerly occupied by older big-box stores.
On another front, some large former store spaces have been converted into self-storage facilities. Storage space,
ironically, remains in demand because we still seem to buy a lot of stuff, despite the shift in overall spending.
Thus, demand for retail space has weakened somewhat with the advances in e-commerce, but the numbers
suggest that consumer spending is still high and that people like to go out to spend their money. Retail owners
that keep up with these shifts in spending patterns will have the best shot at surviving and prospering in this
ever-moving economy. n
By Victor Calanog and Barbara Byrne Denham
Barbara Byrne Denham is an economist in the research and economics
department at Reis Inc. She previously
served as chief economist at Eastern
Consolidated and is a Ph. D. candidate
at New York University, where she
has studied economics, monetary
theory and game theory. Reach her
Victor Calanog is chief economist
and senior vice president for research
at Reis Inc. ( www.reis.com). He writes
a monthly column on property types
for Scotsman Guide. Calanog and his
team of economists are responsible
for data models, forecasting, valuation
and portfolio services for clients in
commercial real estate. Reach him
Source: Reis Inc. and U.S. Bureau of Labor Statistics *Not including gambling and fitness
2007-2017 employment growth 2017 employment
Employment Growth in the Entertainment and Retail Sectors