As highlighted by recent CBC blogs, the retail sector is thriving. It continues to defy historic lows in available space with plans for another 1,000 new stores to be launched this year, which only underscores its resilience amid challenges in commercial real estate. Deloitte has recently released holiday sales projections for the retail sector, and the 2023 holiday season is poised to strengthen it further. According to Deloitte’s annual holiday retail forecast, holiday retail sales are expected to increase between 3.5% and 4.6% in 2023.
Overall, Deloitte’s retail and consumer products practice projects that holiday sales will total between $1.54 trillion and $1.56 trillion during the November to January timeframe. In 2022, holiday sales saw a 7.6% growth in the same period. Deloitte also forecasts that e-commerce sales will grow between 10.3% to 12.8% year-over-year during the 2023-2024 holiday season. This is likely to result in e-commerce holiday sales reaching a range of $278 billion to $284 billion this season.
Retail sales are expected to increase despite higher prices, which are creating competition for consumer spending. Although there was a sharp rise in spending on services post-pandemic, it appears to be leveling off since last year. Additionally, spending on durable goods remains high compared to pre-pandemic levels. This holiday season, e-commerce sales are expected to remain strong as consumers search for the best deals online to maximize their budgets. Retailers who remain adaptable to shifting consumer demands and behaviors are likely to experience growth this holiday season.
How will this impact CRE?
As the retail sector thrives and continues to expand with the launch of new stores, this growth defies the historical challenges faced by CRE in terms of space availability. This trend is likely to generate increased demand for commercial retail spaces, particularly in prime locations, as retailers seek to capitalize on the holiday shopping frenzy. The growth of e-commerce sales further fuels this demand, as businesses require distribution centers and logistics hubs to meet the surge in online orders. Additionally, the overall positive outlook for the retail sector contributes to investor confidence in commercial real estate tied to retail properties. In summary, the strong holiday sales anticipated for 2023 are expected to drive demand for CRE, particularly in the retail segment, creating opportunities and potential gains for property owners and investors in the commercial real estate market.