Retail sales in Clark County were up slightly over last year with a 6.4 percent average increase in the first two quarters of 2012.
Any increase represents a positive direction considering the fact that the retail climate essentially fell off a cliff when the recession cloud moved in. Although the cloud continues to hover, there are sun breaks providing optimism for property owners and businesses. While assembling information for this report, I took a walk down memory lane and reviewed statistics used from reports back to 2002.
Retail sales followed the increase during the construction boom in housing and commercial development. Likewise, retail sales flattened in 2006 and then dropped during the recession, falling by more than 20 percent between 2006 and 2009 (See chart).
The retail development boom from 2003-2008 included many new projects with anchored centers and neighborhood centers. New construction generally translates to higher rental rates due to land prices, vertical improvements and fees. National and regional retailers have an easier time committing to higher rental rates as they have more resources, as well as demographic and market information. Local businesses, especially startups, have a more difficult time projecting revenues since they have no history or rearview mirror to project forward what their sales will be. As a result, many local businesses committed to high rental rates during the boom that were not sustainable.
Consumers in Clark County have always been motivated by getting good value. However, following the recession they either stopped spending or sought ways to save outside our community. Clark County continues to lose 33 percent of its retail dollars to Portland. The redevelopment of Jantzen Beach and the Walmart store at Hayden Meadows will provide additional shopping options close to home for Vancouver residents. Internet sales impact brick-and-mortar businesses more than ever.
Unfortunately, retail sales leakage is not a plus when it diverts sales away from our local businesses and sales tax revenues from the cities’ coffers. Although vacancies in shopping centers remain high, the vacancies have created an opportunity for startup businesses to take advantage of the lower rental rates in shopping centers.
There has been a “course correction” or “new normal” in rental rates in shopping centers, which are down 30 to 35 percent on average over the peak reached several years ago. The post-recession years have created a unique opportunity for retail/service businesses to take advantage of affordable rental options.
In addition, more resources are available today to assist local businesses through trade organizations, marketing consultants, the City of Vancouver Economic Development team, and Buy Vancouver, among others. These services, combined with the lower rental rates, create a promising recipe for success.
The city of Vancouver and Clark County Community Development have streamlined the permit process and, in some cases, lowered fees to encourage economic development in Clark County. Vancouver’s Downtown Association has made significant strides with the revitalization to attract quality local businesses downtown.
Although the sales tax is a liability to most retail business in Clark County, some businesses thrive regardless of economic pressures. Walmart Neighborhood Markets have popped up within the Portland metropolitan area and we may see as many as four in our community. The markets are a condensed version of the typical Walmart store offering mostly groceries with a pharmacy department. Regardless of its size, once a Walmart store opens it generally is followed by quick-serve restaurants, coffee shops and delis eager to take advantage of the large number of consumer trips the Walmart generates per week.
My predictions for 2013: Retail sales will continue to rise at a slow but steady pace; interest will continue from big box retailers, including grocery and home improvement stores; retail rental rates will remain flat; and vacancy in retail centers will decrease slightly.
Deborah Ewing is vice president/managing broker for Eric Fuller & Associates.