Vacancies at U.S. shopping malls climbed to the highest in at least a decade as feeble employment growth restrained consumer spending, Reis Inc. said.
Regional and super-regional mall vacancies rose to 9.4 percent in the three months ended Sept. 30 from 8.8 percent a year earlier and 9.3 percent in the second quarter, according to the New York-based property-research company. It was the highest since Reis began publishing the data in 2000.
Store owners’ revenue is falling as the U.S. unemployment rate hovers above 9 percent, depressing consumer confidence, and online stores capture more customers. Retail sales in the U.S. unexpectedly stagnated in August following a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed Sept. 14.
“The ongoing lack of demand for retail goods and retail space has not left regional malls unscathed, with tenants considering other retail formats or scaling back on their space requirements,” Ryan Severino, senior economist at Reis, said in today’s report.
Malls are struggling as vacancies by anchor tenants spur smaller stores to close or shrink space, Reis said. Leasing may improve this quarter as clothing and electronics retailers add locations to capture holiday sales, said Jeremy Moller, a retail real estate broker at JSH Properties Inc. in Seattle.
“Certain businesses try to get open before Thanksgiving for the holiday-shopping rush,” he said.
Rents Little Changed
Landlords’ asking mall rents rose to $38.81 per square foot in the third quarter from $38.77 in the previous three months and $38.72 a year earlier, according to Reis.
At neighborhood and community shopping centers, asking rents averaged $19.02 a square foot, the same as in the second quarter and down from $19.07 a year earlier. Tenants paid an average of $16.54 per square foot, including any landlord concessions, down from $16.58 a year earlier and unchanged from the second quarter, Reis said. It was the 14th straight period that so-called effective rents were unchanged or fell.
Vacancies at community and neighborhood centers were 11 percent, unchanged from the second quarter and up from 10.9 percent a year earlier, the research company said. It was the highest rate since 1990, when it reached 11.1 percent.
Shopping centers, usually anchored by supermarkets, drugstores or discount retailers, had a net decrease in occupied space of 17,000 square feet (1,600 square meters) last quarter, compared with a net gain of 696,000 square feet a year earlier, Reis said. So-called net absorption improved from the loss of 459,000 square feet in the second quarter.
New Shopping Centers
About 812,000 square feet of new shopping-center space was added to the market in the second quarter, keeping completions close to all-time lows, according to Reis.
Vacancies at shopping centers were unchanged or increased from the second quarter in 55 of the 80 metropolitan areas surveyed by Reis, while effective rents held steady or fell in 52 markets.
“There’s a lot of subleasing of surplus space” as retailers reduce average store sizes and close some locations amid competition from online stores and a shift in consumer preferences, said Moller, the real estate broker.