U.S. Shopping Center Rents Climb Amid Little Development
Rents and occupancies at U.S. shopping centers rose in the second quarter amid little development of properties, research company Reis Inc. (REIS) said.
Occupied space rose by a net 2.06 million square feet (191,000 square meters), the third-largest addition since the slump for neighborhood and community shopping centers began in the first quarter of 2008, according to a report today by New York-based Reis. The so-called net absorption figure compared with a loss of 39,000 square feet a year earlier.
“The second-quarter results provided heartening evidence that a slow recovery in neighborhood and community shopping centers is beginning to take root,” Ryan Severino, a Reis senior economist, said in the report. Still, “we remain cautious about pronouncing a turnaround until we observe a couple more quarters of improvement.”
Vacancies are falling from at least a 12-year high -- first reached in the fourth quarter of 2010 and repeated for most of last year -- as a low level of shopping-center construction limits availability, Reis said. About 572,000 square feet of new space came online in the three months ended June 30, the second- lowest quarterly figure in Reis records dating to 1999.
Shopping-center vacancies dropped for a second consecutive quarter to 10.8 percent, down from 10.9 percent in the previous three months and 11 percent a year earlier, Reis said. Effective rents, or what’s paid after any landlord discounts, averaged $16.55 a square foot, up from $16.49 a year earlier.
U.S. same-store sales, excluding Wal-Mart Stores Inc. (WMT) locations, rose 0.2 percent in June from a year earlier, following a 1.7 percent increase in May, the International Council of Shopping Centers said yesterday.
Shares of shopping center owners are the second-best performing group of real estate investment trusts this year. The Bloomberg shopping center REIT index rose 20 percent this year through yesterday, trailing only the Bloomberg mall REIT index, which gained 22 percent.
“We’re seeing improvement in occupancy, leasing spreads, renewals -- all of the different metrics that we measure on a quarterly basis,” David Henry, chief executive officer of Kimco Realty Corp. (KIM), the largest U.S. owner of community shopping centers, said in a June presentation at a conference in New York. “They are all getting stronger.”
At regional malls, which typically include department stores and are larger than neighborhood and community shopping centers, vacancies fell to 8.9 percent in the second quarter from 9.3 percent a year earlier, and rents rose to $39.12 a square foot from $38.77.
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