Vacancies at U.S. neighborhood and community shopping centers climbed in the fourth quarter from a year earlier as unemployment lingered close to 10 percent, real estate research company Reis Inc. said.
The vacancy rate at shopping centers rose to 10.9 percent from 10.6 percent a year earlier, the New York-based firm said today in a report. It was unchanged from the prior two quarters, when the rate reached the highest level since 1991. The record of 11.1 percent was set in 1990, according to Reis data going back 30 years.
Retail tenants and landlords are grappling with a jobless rate that rose to 9.8 percent in November, the latest period for which figures are available, from 9.6 percent the prior month. The best holiday sales in five years likely had little impact on vacancies, leading only to short-term leases by seasonal retailers, according to Reis.
“More likely than not, retailers will not make medium- to long-term lease decisions based on holiday sales,” Ryan Severino, an economist at Reis, said in an e-mail.
Shopping centers saw a net increase in occupied space of 92,000 square feet (8,500 square meters) last quarter, less than the 474,000 square feet of so-called net absorption in the third quarter, Reis said. A year earlier, landlords had a net loss in occupied space of 2.6 million square feet, according to Reis.
Effective rents, or what tenants actually pay, dropped to an average $16.56 a square foot from $16.81 a year earlier and from $16.58 in the third quarter, the company said. Landlords’ asking rents fell to $19.05 a foot from $19.18 a year earlier and $19.07 the previous three months, according to Reis.
At regional and super-regional malls, vacancies fell to 8.7 percent in the three months ended Dec. 31 from 8.8 percent both in the third quarter and a year earlier, Reis said. Mall tenants tend to sign longer-term leases, which helps stabilize vacancy rates, Severino said.
U.S. retailers’ 2010 holiday sales jumped 5.5 percent as shoppers snapped up clothing and jewelry at Macy’s Inc., Tiffany & Co. and other stores, according to MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include sales made over the Web.
Fluctuations in sales don’t correlate to retail vacancies quarter by quarter, said Doug Poutasse, the Boston-based head of strategy and research at Bentall Kennedy, a real estate investment adviser.
‘Much Shorter Leases’
“Longer term, those things make a difference, but the leases buffer you,” Poutasse said in a telephone interview. “During the downturn, landlords are willing to give retailers space with much shorter leases.”
Regional malls typically include department stores and fashion and general merchandise retailers and range in size from 400,000 to 800,000 square feet, according to the International Council of Shopping Centers. Super-regional malls, including the Mall of America in Minnesota, South Coast Plaza in Southern California and Tysons Corner Center in Virginia, are defined as those larger than 800,000 square feet.
Neighborhood shopping centers tend to be 30,000 to 150,000 square feet and mainly house convenience retailers. Community shopping centers are 100,000 to 350,000 square feet and may include a discount department, home-improvement or grocery store.
“The sector appears to be meandering,” Severino said. “Without clear signs of a strong economic and labor market recovery, we expect this trend to persist over the next couple of quarters.”
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