With the recession well in the past, furniture retailers are again on the upswing, sales growing 4.4% in the U.S. over the previous year. They act as economic barometers, typically the first to suffer during a downturn and the first to recover when consumer confidence returns. A subset of wholesale, discount and rent-to-own have gained considerable traction in Southern California, so much so that they outnumber mid- to high-range stores by three to one.
The rate of homeownership decreased 1% annually on average in California since the end of the Great Recession. Last year, only 54.4% of residents owned homes, compared with the national average of 63.9%. More residents are opting to rent, either due to a lack of affordable housing or as a cost-saving measure. The current housing dilemma, coupled with money-conscious millennials starting families, has created the perfect environment for discount furniture retailers to thrive and compete against mid- to high-tier retailers in the same category.
Notable examples of active tenants include Jerome’s and Bob’s Discount Furniture, both of which have expanded in the Greater Los Angeles region and are even looking at space recently vacated by Kmart and Toys “R” Us, an appealing prospect for landlords looking to backfill 20,000 to 50,000 square feet of vacant big-box space. The rent-to-own concept, which allows consumers to lease designer and brand-name furniture, has also risen in popularity among shoppers unable to spend hundreds on furniture upfront.
The commonality between furniture stores on both ends of the cost spectrum is their appeal as experiential retailers. The showroom format allows customers to see and touch products in mock living and bedroom environments, something e-commerce has yet to replicate. As long as current conditions prevail, and some economic kryptonite isn’t thrown into the mix, furniture retailers of all types will remain members of Southern California’s “Fantastic Five” for the foreseeable future.
— Analysis by CBRE Group Inc.
