when it stood at 11.9 percent , the highest figure until that point .
While on the surface it may seem concerning that this metric has been trending downward since its peak , this is more likely an indication that this variable is returning to its original growth path after experiencing an exogenous shock . Nonetheless , e-commerce is likely to continue its growth over the coming years , with the potential to reach 20 percent of the market share of total retail sales by the end of this decade .
Retail sales have been on the rise since the second quarter of 2020 , experiencing a structural break from their original growth path , leaping upward to a new , elevated growth path . However , high inflation has contributed in part to the sustained increases in spending observed as consumers are paying substantially more now than they were pre-pandemic for the same basket of goods — all stemming from a multitude of factors including supply chain pressures . Sales across all sectors have been strong in the past few months , however , indicating a willingness for consumers to spend .
Although retail sales growth has been consistently positive in the first half of this year , the University of Michigan ’ s Consumer Sentiment Index reveals a disparate trend . Trending on a sharp decline since mid-2021 , consumer sentiment reached an all-time low reading of 50 in June — due to inflation concerns , rising interest rates , and negative , albeit mild , real GDP growth in the first half of 2022 . ( For context , monthly surveys of the consumer sentiment index date back to January 1978 . Prior to that , the data on a quarterly or semi-annual basis extends as far back as November 1952 .) Since its historical low in June , consumer sentiment recovered slightly to 58.2 in August .
Nevertheless , consumer sentiment remains lower than it was in April 2020 ( 71.8 ), indicating that sustained high inflation has eclipsed public health uncertainties .
The goods trade is likely to face downward pressure in the latter part of this year and into next , which will directly impact demand for distribution / warehousing properties .
Share of Loans 60 + Days Delinquent by Property Type
Percentage of Loan s Delinquent
20 %
15 %
10 %
5 %
0 %
Jan . 2020
Apr . 2020
Source : Moody ’ s Analytics
Multifamily Office Hotel Retail Industrial
Jul . 2020
Oct . 2020
Jan . 2021
Distribution / Warehouse Performance Metrics
Square Feet ( in millions )
Apr . 2021
450
375
300
225
150
75
Jul . 2021
Oct . 2021
Jan . 2022
Completions Net Absorption Vacancy
0
2017 2018 2019 2020 2021 2022 * 2023 * 2024 * 2025 * * Forecast Source : Moody ’ s Analytics CRE
Apr . 2022
Jul . 2022
12 %
10 %
8 %
6 %
4 %
2 %
0 %
Vacancy Rate
Such lukewarm consumer sentiment points to the possibility of a slowdown in consumer spending on the horizon with the potential to be very consequential for the warehouse / distribution sector . Factoring in expectations by Moody ’ s that have revised real GDP growth downward to less than 2 percent in both 2022 and 2023 as well as rising interest rates in a bid to tackle soaring inflation ( that also raises the cost of borrowing capital ), the goods trade is likely to face downward pressure in the latter part of this year and into next , which will directly impact demand for distribution / warehousing properties .
The sector ’ s fundamentals , however , remain positive . Vacancy rates for warehouse distribution properties have fallen 170 basis points in the first half of 2022 and are projected to decline further , with vacancy reaching a record low of 4.7 percent by the end of the year . Similarly , the completions pipeline remains quite healthy with a total of over 200 million square feet expected to come online this year to partly satiate demand , which is projected to top 333 million square feet .
While next year ’ s projected figures for completions and net absorption will not reach the record-breaking heights of 2021 and 2022 , they remain elevated compared to historical averages , with occupancy expected to stabilize . Evidence from the capital markets paints an equally positive picture , with the percentage of loans 60-plus days delinquent in the industrial sector consistently below 1 percent ( and on the decline ) for the past 18 months . Among the core five sectors , industrial delinquencies have consistently been the lowest , even prior to the pandemic . Despite leading indicators suggesting the possibility of headwinds for the sector , the outlook remains quite bullish for the sector in terms of both occupancy and rent growth , and deservedly so .
Ermengarde Jabir , Ph . D . Economist with Moody ’ s Analytics Reis
CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 13