Q3-2024: Marketplaces Industry Quarterly Report

Marketplaces Industry Report

Q3-2024

The U.S. Marketplaces Industry began the second half of 2024 on a strong note. Consumer spending in the third quarter remained healthy, helping to propel retail sales higher. Though there were mixed results for employment in the retail and food services sectors in Q3-2024, the overall trend this year is still positive. Marketplaces operational performance continued to see year-over-year gains, with occupancy rates reaching the highest level in five years, partly due to limited supply and higher demand. Scroll through ICSC’s Q3-2024 Report in full, or click to the individual sections using the navigation below.

Quarterly Retail and Food Services Sales: Q3-2024

Retail and Food Services Sales* Performance and Overview**

Non-Store Retailers

Food-and-Beverage Stores

General Merchandise Stores

Food Services and Drinking Places

U.S. Dollars (Millions)

Retail and Food Service Sales

Month-to-Month % Change

July

September

Q3-2024 Overall Sales

$1.58 Trillion

+1.6% Q-o-Q

Health and Personal Care Stores

Source: U.S. Census Bureau

U.S. Employment Situation

In Q3-2024, the retail sector lost 2,700 jobs from the previous quarter, bringing job gains for 2024 to 59,500. There was retail employment decline in July and August; however, that drop was nearly offset by gains in September, which was the first increase in four months and strongest rise since March. The food services sector gained 71,500 jobs in Q3-2024, helping to boost the total number of jobs added in 2024 to 112,700. By the end of Q3-2024, retail employment was up 151,900 from its February 2020 level, while the food services sector had nearly 114,000 more employees compared to that pre-pandemic point.

U.S. Employment (in Thousands)*

U.S. Shopping Center Performance Benchmark

* Seasonally adjusted

Source: Bureau of Labor Statistics

Retail Food Services and

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Retail

Food Services and Drinking Places

July

August

September

Source: NCREIF and ICSC Research

Consumer Engagement

Source: Surveys of Consumers, University of Michigan: Consumer Sentiment

Purchase Channels: September – October 2024

Source: ICSC Research

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CONTENTS

Retail and food services sales (excluding motor vehicles, auto parts and gasoline) totaled $1.58 trillion in the third quarter of 2024. Compared to the previous quarter, Q3-2024 sales grew 1.6% and increased 3.5% over Q3-2023, the highest growth rates of the year so far. These Q3 gains helped propel year-to-date sales in 2024 to $4.68 trillion, which is 3.3% more than the same period in 2023.

On a rolling four-quarter basis (Q4-2023 to Q3-2024), base rent at marketplaces across the U.S. increased 4.3% over the prior comparable period. Q3-2024 alone saw base rent rise 5.6% year over year, the strongest growth in five quarters. Over the past four quarters, all regions across the U.S. saw an increase in base rent and net operating income (NOI), with the East and Midwest experiencing the biggest gains in both measures. For Q3 alone, the East saw rent rise 9.6% and NOI grow 11.4%. Shopping center occupancy rates were 92.6% in Q3-2024, which is 0.5 percentage points higher than the previous quarter and the highest level in five years.

Brick-and-mortar locations continue to represent the single largest purchase channel. Between late September and late October 2024, 88% of consumers made a purchase in a physical store or ordered online for in-store pickup. The share of consumers buying in stores or picking up an online order in store was highest among Millennials at 94%. They were followed by Gen X (91%), Baby Boomers (85%) and Gen Z (82%). For shopping centers specifically, more Gen Zers visited enclosed malls (66%) and outlet centers (64%) than any other cohort within the 30-day reference period, while Gen Xers were the top visitors to neighborhood/community centers and power centers.

Consumer Sentiment

Consumer sentiment started Q3-2024 at the lowest level since November 2023 after declining for four consecutive months. However, Q3 ended on a brighter note with sentiment rising to the highest level in five months as consumers’ short- and long-term economic outlook improved as well as their view on the further slowing of inflation. Although the consumer sentiment index remains below the historic average, it is roughly 40% higher than the historic low reached in June 2022.

Consumer Economic Sentiment

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Industry Insights

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Q3 Sales by Tenant Category

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Percent Change

Building Materials and Garden Equipment/Supplies Dealers

Index

Index of Consumer Sentiment

Year-Over-Year % Change in Consumer Sentiment

Drinking Places

Year-Over-Year % Change

+3.5% Y-o-Y

$523,859

$525,512

$529,380

The member organization for industry advancement, ICSC promotes and elevates the marketplaces and spaces where people shop, dine, work, play, and gather as foundational and vital ingredients of communities and economies. ICSC produces experiences that create connections and catalyze deals; aggressively advocates to shape public policy; develops high-impact marketing and public relations that influence opinion; provides an enduring platform for professional success; and creates forward-thinking content with actionable insights – all of which drive industry innovation and growth. For more information, please visit www.ICSC.com.

12,363.30 12,365.60 12,404.90

July August September

15,661.30 15,646.80 15,662.20

August

% Change

86%

Feel secure with their current job

50%

Believe their financial situation one year from now will be "somewhat better" or "significantly better"

38%

See the state of the economy a year from now as "somewhat better" or "much better"

30%

View their current financial situation compared to a year ago as "somewhat better" or "significantly better"

27%

Plan to increase non-essential spending over the next three months

24%

View the current health of the U.S. economy as "good" or "very good"

Shares of U.S. adults

Source: ICSC Research

*Trailing 4 quarters through Q3-2024. Data accessed October 29, 2024.

Supply and Demand Dynamics of Commercial Real Estate

A lack of new development since the 2008 financial crisis and growth in the demand for space following the pandemic have resulted in a supply-constrained retail market with the availability rate at a record low. In turn, the retail vacancy rate stands at just 4.1%, below any other point over the past 16 years and lower than any other commercial real estate property type at the moment. For the office sector, the gap between supply and demand continues to grow as the need for space declines. The industrial sector is seeing higher overall vacancy rates as a surplus of supply has been added to the market in response to growing demand. Although limited retail space is affecting leasing activity, current conditions position the retail sector to maintain stability and healthier fundamentals compared to other property types.

Retail Net Deliveries

Office Vacancy

Net Deliveries (Millions of Sq. Ft.)

Vacancy Rate

Retail Vacancy

Connect.

Clothing and Clothing Accessories Stores

Furniture and Home Furnishings Stores

Sporting Goods, Hobby, Musical Instrument, and Bookstores

Electronics and Appliance Stores

* Seasonally adjusted ** Excluding motor vehicles, auto parts and gasoline

July August September

Physical Stores

Share of Consumers

Gen X

Millennials

All Consumers

Baby Boomers

Gen Z

Click-and-Collect

Ship to Self

78%

61%

78%

86%

83%

35%

46%

49%

33%

19%

58%

42%

56%

71%

In Q3-2024, non-store retailers (helped by online summer sales) and health and personal care stores experienced the strongest gains, and for the first time since the end of 2022, building material stores experienced positive year-over-year growth in quarterly sales. Sporting goods, hobby, music and bookstores saw year-over-year sales decline the most, while sales at electronics and appliance stores saw the largest quarter-to-quarter drop.

Office Net Deliveries

Industrial Net Deliveries

Industrial Vacancy

Source: CoStar

Supply and Demand Dynamics of CRE | Retail and Food Services Sales Performance | U.S. Employment Situation U.S. Shopping Center Performance Benchmark | Consumer Engagement | Consumer Sentiment