U.S. Shopping Centers Add Less Space, Rents Climb
During the first quarter, U.S. shopping center occupancies rose to a three year high, allowing landlords to raise rents as little space was added to the market, said Reis Inc.
Neighborhood and community shopping center vacancies fell from 10.9 percent to 10.6 percent, and effective rents rose to $16.63 per square foot from last year’s $16.51. Rents and occupancies were last higher in 2009.
“It’s a slow but consistent recovery,” Ryan Severino, a Reis senior economist, said. “There’s nothing being built, so as long as there’s any semblance of demand, it’s pushing vacancies down slightly and rents up slightly.”
The slowly improving labor market and little competition from new shopping centers is allowing retail landlords to benefit. In February, the jobless rate dropped 7.7 percent, the lowest since December 2008, from 7.9 percent the previous month, according to the Labor Department. During the first quarter, 873,000 square feet of new shopping centers became available, which is 57 percent lower than the previous year.
Occupied shopping center space rose by a net 2.73 million square feet in the third quarter, compared to 2.68 million square feet in the previous three months, and 3.51 million square feet a year earlier, Reis said.
At regional malls, which are larger than neighborhood and community shopping centers, and which usually include department stores, vacancies fell to 8.3 percent in the first quarter from 9 percent during the previous year. Rents rose from $39 to $39.46, Reis said.
Reis’s report states that until the U.S. employment recovery becomes more vigorous, “retail sales will remain listless” and shopping center “vacancy compression will be slow and tedious.”