According to the PwC Real Estate Barometer, retail real estate remains in recession in a majority of markets.
The PwC survey has four grades for markets.
- Contraction: The phase after a market peak, characterized by softening market conditions and a shift in the supply/demand balance leading to increasing vacancy rates, slowing rental growth and rising overall cap rates.
- Expansion: The phase following recovery, characterized by strong demand and increasingly tight market conditions leading to low vacancy rates, robust rental growth, and decreasing overall cap rates.
- Recession: The phase following contraction, characterized by very low demand and high levels of supply that were added during the previous two phases. Typically involves high vacancies, negative rental growth, and high overall cap rates.
- Recovery: The phase following the market bottom, characterized by tightening market conditions and a shift in supply/ demand balance leading to reduced vacancy rates, more balanced rental growth, and a stabilization of overall cap rates.
Investors expect that retail real estate will turn a corner in 2013--when 53.8 percent of markets be in a recovery phase. The recovery will strengthen in 2014, although only 8.5 percent of markets will be in an expansion phase even then.
Source: PwC Real Estate Investor Survey