Retailer demand for space at U.S. shopping centers slowed in the fourth quarter amid sluggish economic and employment growth, Reis Inc. said.
Occupied space at neighborhood and community shopping centers rose by a net 2.25 million square feet (209,000 square meters), down from 4.12 million square feet a year earlier, the New York-based real estate research firm said today. While it was the sixth consecutive quarter of positive net absorption, “demand remains incredibly weak,” Reis said in its report.
Slow growth in the U.S. economy and an unemployment rate stuck at almost 8 percent are leading to smaller declines in retail-center vacancies. Gross domestic product growth of about 2 percent last year was “a clear disappointment,” Reis said. Until economic growth and labor-market gains shift into a “higher gear,” consumer spending will be muted, said Ryan Severino, a Reis senior economist.
“There’s a dearth of demand out there,” he said in a telephone interview. “It’s difficult to be more optimistic.”
Shopping-center vacancies dropped to 10.7 percent in the fourth quarter from 10.8 percent in the previous three months and 11 percent a year earlier, Reis said. The fourth-quarter figure was the lowest in three years. Effective rents, or what’s paid after any landlord discounts, averaged $16.59 a square foot, up from $16.51 a year earlier.
U.S. payrolls rose by 155,000 workers last month following a 161,000 gain in November, Labor Department figures showed Jan. 4. The unemployment rate held at 7.8 percent after the November figure was revised up from a previously reported 7.7 percent.
Retail sales in November rose 0.3 percent, the latest month for which figures are available, following an October decline of 0.3 percent, according to data from the Commerce Department.
At regional malls, which typically include department stores and are larger than neighborhood and community shopping centers, vacancies fell to 8.6 percent in the fourth quarter from 9.2 percent a year earlier, and rents increased to $39.31 a square foot from $38.92, Reis said.