Demographics and access to debt influence retailer success

“If you’re invested in the S&P 500, you’re doing great, and you’re getting good returns,” he said. “If you own a home, depending on where you bought, you’re doing great, so it depends on who you are, where you are, and what you’ve invested in.” Similarly, certain shopping center tenants are doing well, while others are suffering, he notes.

Andrews was presenting an economic forecast at ICSC’s recent Red River States Conference & Deal Making, in Fort Worth, Texas. Retailer success all depends on whether the retailer is offering items that shoppers want and can also afford, he said. Andrews cited a recent U.S. Census Bureau study showing that home furnishings and groceries are selling well, and he also said that demographics often determine product desirability. “One of my side gigs is as lead guitarist in a rock band,” Andrews said. “Is rock ‘n’ roll dead? Well, yes, the rock ‘n’ roll that people don’t want to listen to anymore is dead; the rock ‘n’ roll that people continue to want to listen to is still doing fine.”

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Sales certainly depend on whether customers can afford to shop, Andrews said, pointing out that rising debt levels are creating a major barrier for many shoppers. Student debt, in particular, is growing, he said, and so are automobile, credit card and mortgage debt.

“Home equity debt on mortgages started to go way up right before the credit crisis,” said Andrews. “That’s why people could spend more money at your stores. They weren’t making more money — they were borrowing more money. … There’s a connection [between] their access to debt and their ability to buy the product that you sell or the product that your tenants sell. It’s important to know if they can afford it.”

Even so, he said, retail real estate remains a viable business. “There is still a ton of money to be made in retail real estate,” said Andrews. “We need to be nimble and aware.”