SOUTH: Looking Good

ECONOMIC OVERVIEW

Recovering at a quicker clip than many other regions, the South reported its lowest unemployment rate in more than three years. This good news also boosted consumer confidence here significantly.

“It would appear that the South Census region is showing positive improvement and should prove to be good for retailers, too,” says Jack Kleinhenz, PhD, chief economist with the National Retail Federation.

Wilmington, Del.

Things are looking up in Dixie thanks to a faster-recovering economy and a lower unemployment rate than most of the nation

JOBLESS RATE

Boasting the second-lowest unemployment rate of all the Census regions in the country, the South appears to be in a state of recovery. In April 2012, the South laid claim to a 7.7 percent jobless rate, a marked improvement from its rate of 9.4 percent in April 2010. Compared with the 9.5 percent unemployment rate in the West and even the overall U.S. rate of 8.2 percent (as of May 1), the South is lookin' good.

CONFIDENCE FACTOR

According to the BIGinsight Monthly Consumer Survey, consumers took a leap of confidence in May 2012 when 31.9 percent said they were “Confident” or “Very Confident” about the chances for a strong economy during the next six months. This number was up from the 27.7 percent who felt the same in May 2011.

Interestingly, fears of being laid off haven't waned for some Southerners. In May 2012, 2.9 percent said they were concerned with being laid off, while 3.1 percent felt the same in May 2011 along with 2.7 percent in 2010.

SPENDING OUTLOOK

Despite confidence on the rise (and unemployment on the decline), more Southerners say they have become more practical and realistic in their purchases (up to 46.6 percent from 45.2 percent in May 2011), according to the BIGinsight survey.

More people in this region (44 percent) have also become more budget conscious, up from the 41.4 percent who felt the same in 2010. Consumers are watching their budgets more efficiently by doing more comparative shopping online (up to 25.1 percent in May 2012 from 19.1 percent in 2010).

COST OF GOODS

The Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) increased in April 2012 in the South by 2.5 percent over the previous 12-month period, according to the Bureau of Labor Statistics. This represented the region's lowest increase in many months, though this rise was still higher than the average U.S. increase for the same period (2.3 percent).

Cost increases were led by rising prices in the energy index (1.9 percent increase) and the index for all items less food and energy, which advanced 2.4 percent. This category includes expenses such as shelter (up 2.3 percent), medical care (up 3.7 percent), and education and communication (up 2.6 percent).

RETAIL REAL ESTATE

On the commercial real estate front, the South region (also defined as the South Atlantic Region by Reis, Inc., a retail real estate market forecaster) fared marginally better than regions such as the Midwest and Southwest, but much more poorly than the Northeast and West.

VACANCY RATES

The South delivered a vacancy rate (11 percent) in May 2012 that was on par with the overall U.S. rate (10.9 percent). This rate was, however, a slight increase over the rates reported for the first quarters of 2011 and 2010, according to Reis, Inc. As such, retail real estate recovery is lackluster in this region, at best.

“The South Atlantic didn't have a huge real estate boom and bust like some other areas of the country—so it didn't have to contend with the fallout from that,” says Ryan Severino, a senior economist with Reis, Inc. “This market has affluent consumers but not as much supply for real estate. It's definitely not the weakest market.”

Louisville, Ky.

RENTS

Effective rents in the South rang in at $15.69 per square foot for the first quarter of 2012, according to Reis, Inc. This was a slight uptick from the first quarter of 2011 when effective rents came in at $15.56 per square foot in the region.

Again, this region falls in the middle between the much higher reported rents in the West and Northeast and the slightly lower rents in the Midwest.

METRO MARKETS

Home to some of the most charming and genteel metros in the country, the moderately recovering South certainly lays claim to some unique areas of growth.

CITIES TO WATCH

The hip urban center of Austin, Texas, boasted a lowered vacancy rate of 7.4 percent in the first quarter of 2012, according to Reis, Inc. This city also garnered an impressive effective rent of $20.19.

A surprising rising star, Lexington, Va., had a 7.6 percent vacancy rate (a decline over the previous year) and an effective rent of $13.88 (an increase over 2011) for the first quarter of 2012.

Interestingly, Suburban Virginia saw a notably low vacancy rate of 6.8 percent while calling in rents of $27.56 per square foot.

The music-making center of Nashville reported a declining vacancy rate of 7.9 percent along with an increased rent of $15.35. The hopping Florida hub of Miami also experienced a lower vacancy rate (7.7 percent) and an increased effective rent ($25.14).

FASHION TRENDS

The Fall 2012 season's love affair with the film noir trend is spot on for the ladylike South region's consumers. This key fashion direction mimics the looks of ‘40s and ‘50s celebs such as Marlene Dietrich.

“It's a return to suits and pantsuits,” says Roseanne Morrison, fashion director at The Doneger Group, who says this trend is gaining a foothold because “people feel they have to get a little more dressed up today if they are looking for jobs or are in the workplace—they have to be a little more polished.”

Morrison also points to fashion's current muse, Kate Middleton, who wears a plethora of ladylike clothes.

In the South, however, this dressed-up trend will take on a more colorful palette. “The South is always more colorful,” says Morrison. “The suits might be black and gray in New York but they will be colorful in the South for sure.” EB