Regional mall vacancies in US rise to record on unemployment

SAN FRANCISCO: Vacancies at the largest US shopping centers reached a record 8.8% in the fourth quarter as unemployment rose and consumers spent less, Reis Inc said.

Vacancies at smaller neighborhood and community centres increased to 10.6%, the highest level since 1991, from 8.9% a year earlier, New York-based Reis, a real estate research company, said on Jan 6 in a statement.

“We expect economic pressures to continue to assail consumers and businesses,” Reis economist Ryan Severino said in the statement. “Although it appears that we have reached the end of the technical recession, continuing high unemployment and inconsistent consumer spending patterns will weigh on retail properties for at least another 18 to 24 months.”

About 7.2 million jobs have been lost since the recession began in December 2007, and almost 4.6 million people were collecting extended unemployment benefits in the week ended Nov 21, according to a Commerce Department report. Retail sales rose 2.3% during Christmas week and probably rebounded from 2008’s holiday season, the worst since the International Council of Shopping Centers began statistics four decades ago.

Vacancies at the largest malls, known as regional and super-regional centers, rose from 7.1% in the fourth quarter of 2008.

Asking rents at regional and super-regional malls fell to US$39.03 (RM131.8) per sq ft, the fourth straight quarterly drop and a 3.6% plunge from the fourth quarter of 2008. That’s the biggest annual loss in 10 years of research on that sector, Reis said. Rents fell 0.4% from the third quarter.

Regional malls typically include department stores and fashion and general merchandise retailers and range in size from 400,000 to 800,000 sq ft, according to the ICSC. Super- regional malls, including the Mall of America in Minnesota, South Coast Plaza in Southern California, and Tyson’s Corner in Virginia, are defined as those larger than 800,000 sq ft.

Effective rents for neighborhood and community centres fell in all 77 markets covered by Reis, a first in 29 years of data. Rents fell to US$16.75 psf, down 0.5% from the third quarter and down 2% from the fourth quarter of 2008. Effective rents are what tenants actually pay landlords.

Occupancies at neighborhood and community centres fell for the eighth straight quarter, dropping by 3.4 million square feet, Reis said.

“Until we see stabilisation and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest,” Severino said. – Bloomberg LP