Holiday Spending Projected to Boost CRE, But Consumer Confidence Remains Key Concern Article originally posted on Globe St. on December 4, 2024 Holiday spending in 2024 is expected to grow, offering a potential boost to retail, industrial, self-storage, and multifamily real estate sectors. But questions about consumer confidence and sentiment loom large, casting uncertainty over the season’s momentum, with industry analysts divided. Consumer savings have increased by 20% in real terms compared to pre-pandemic levels, with wages and employment showing substantial gains since 2019. Forecasts from the National Retail Federation and ICSC project retail sales growth between 2.5% to 3.5% over last year. But despite these promising indicators, confidence metrics remain a mixed bag. While consumer sentiment has climbed from 2022 lows, it still lags behind pre-pandemic levels—a factor with major implications for commercial real estate, according to John Chang, senior vice president at Marcus & Millichap. Chang pointed to the recent election as a potential short-term boost for confidence, though its effect could go either way. “If people feel like the economy isn’t good, they’ll behave like it isn’t good,” he said, emphasizing the psychological weight of consumer perception. A strong holiday shopping season could ripple across real estate sectors. Robust retail sales may drive higher industrial and self-storage demand as supply chains replenish and consumers turn to storage options for their purchases. Multifamily could also see indirect benefits, with increased spending signaling greater confidence in household formation. Retail landlords, particularly those operating open-air shopping centers and outlet malls, stand to gain the most. These assets saw modest foot traffic increases earlier this year and could outperform if holiday sales exceed expectations following two years of tepid growth. However, there is one caveat. Chang noted that last year’s nominal 3.9% holiday sales increase translated to just 0.7% real growth after inflation. Even if this year’s nominal growth surpasses projections, inflation-adjusted gains could be as low as 0.8%. Whether consumers act on their financial stability or hold back amid lingering uncertainties will determine how this season—and its downstream real estate impacts—ultimately play out, Chang said. The senior VP’s recent comments echoed similar findings from Black Box Intelligence, which found that while consumer sentiment is improving, spending habits remain cautious. The firm found that consumers are prioritizing essential purchases over discretionary items, a trend that could temper expectations for holiday sales growth. As retailers and landlords brace for the season, the interplay between consumer confidence, inflation, and real wage growth will be critical in determining the outcome. “Holiday sales give us a peek into what’s going on in people’s heads,” Chang said, underscoring their significance as a bellwether for broader economic trends.