Shopping Centers Today

APR 2017

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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A P R I L 2 0 1 7 / S C T 7 in homeownership does have some effect," said Jeffrey Havsy, CBRE's chief economist in the Americas. "But if you look at the retail numbers, the data is still pretty strong." The home-goods and home- improvement segment has emerged as one of the bright spots in the broader retail market. Total 2016 retail sales (excluding food, motor vehicles and car parts) were up by 2.9 percent from 2015, according to the Census Bureau. By comparison, 2016 sales growth among retailers of building materials and supplies was twice that, at 5.9 percent, and furniture and home- furnishings stores outperformed as well, at 3.8 percent. "There is something that is going on in that category that is a positive story," observed Melina Cordero, CBRE's head of retail research for the Americas. These home-goods chains are getting a boost from a strengthening economy, growing consumer confidence and a postrecession rebound in home sales and new-home construction. Consumers were not buying couches or washer-dryers during and immediately after the recession, but this has begun to pick back up, and people are spending again on those big-ticket items, she says. Retailers of soft furnishings and home accessories, such as Bed Bath & Beyond, Crate & Barrel and Williams- Sonoma, are relatively immune to the decline in homeownership because they appeal equally to shoppers who own homes and to those who rent, notes Jaime Katz, a senior analyst at Morningstar. People need to buy home products in either case, Katz says. The retailers likely to feel the brunt of any shift from homeownership to guidance of its own at press time, but it had initially announced plans for 2016 that included opening approximately 40 home-improvement and hardware stores. As of the third quarter of last year, the company had roughly 2,100 home-improvement and hardware stores across the U.S., Canada and Mexico. And last fall Lowe's made a big move in Canada through its $2.3 billion acquisition of that country's Rona home-improvement chain. These days retailers are less likely to try to expand store count and more likely to concentrate on fine-tuning the merchandise to fit needs they perceive in the local market, observes Katz: Urban stores might carry less lumber and have a smaller home- and-garden section than suburban stores, for example, while carrying more household items such as rugs and lamps. Some home-improvement stores have boosted their appliance offerings or added home furnishings as well as seasonal wares and holiday decor items — all while trying to attract as wide an audience as possible, professional contractors included. Do-it-yourself residential customers represent only 18 percent of sales for home-improvement retailers, according to IBISWorld. Professional contractors account for the remaining lion's share: 42 percent of these are working on commercial projects, and 40 percent serve the do-it-for-me residential market. Home-improvement retailers are also offering services in which they act as liaisons in taking a kitchen renovation or other home project from start to finish. "I think as boomers move into do-it-for-me rather than do-it-yourself," said Katz, "that is an important market segment to cater to now." n renting are the home-improvement chains. And yet the home-improvement side has been growing at 5.2 percent per year over the past five years, reaching nearly $170 billion in revenues last year, according to IBISWorld. The dominant players there are Home Depot and Lowe's — Home Depot accounting for nearly half the market, and Lowe's controlling about one-third. Home-price appreciation, housing turnover, household formation and an aging U.S. housing stock are all factors that support growth in the home-improvement category. Renters are less likely to embark on major home-improvement and remodeling projects, for obvious reasons, but the owners of apartments and similar residential rental properties need to do maintenance, repairs and appliance replacement, observers say. "Money is still being spent, it is just being spent by a different group of people," said Havsy. "The other thing that we are seeing is that people who have trouble moving up are remodeling and redecorating, so they are spending money there." But even as the economy and consumer spending have rebounded, new-store growth has remained stalled. "I don't think that either Lowe's or Home Depot are aggressively expanding their footprint," said Katz. "I think some stores are closing through attrition, and they are opening maybe five to 10 stores per year, mostly in Canada or Mexico." Home Depot issued guidance for 2017 that cited plans to open six stores this year. The company currently operates nearly 2,300 stores across the U.S. and in Puerto Rico, the U.S. Virgin Islands, Guam, Canada and Mexico. Lowe's, for its part, had yet to issue

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