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WSJ: Mall Vacancies Soar to 6-Year High as 'Retail Apocalypse' Rages

WSJ: Mall Vacancies Soar to 6-Year High as 'Retail Apocalypse' Rages

By    |   Monday, 02 April 2018 10:34 AM

Empty space in regional shopping malls has reportedly soared six-year high in the first quarter as the retail apocalypse continues to intensify.

The vacancy rate in big U.S. malls increased to 8.4% in the first quarter of 2018, up from 8.3% in the fourth quarter and the highest since the fourth quarter of 2012, The Wall Street Journal reported, citing real-estate data firm Reis Inc., which studies 77 metropolitan areas.

The "retail apocalypse" refers to the closing of a large number of American retail stores beginning in 2016 and expected to peak in 2018.

More than 8,000 U.S. retail stores closed in 2017, roughly double the average annual store closures in the previous decade, as American consumers shift their purchasing habits due to various factors, including the rise of e-commerce. Reuters reported, citing data from the International Council of Shopping Centers.

Meanwhile, neighborhood and community shopping centers in 41 of the 77 areas experienced an increase in vacancy during the 12 months ending on March 31.

“The first quarter tends to see the lowest activity,” the Reis report said. “However, this was an unusually slow quarter for retail leasing and construction.”

However, earlier this year, U.S. fund managers have bet that rising wages and the effects of the Republican-led corporate tax cut will prove a lifeline to middle-market retailers who have struggled to remain relevant in the age of Amazon, Reuters explained.

Wells Fargo, CM Advisors and Plumb Funds are among those asset management firms that are increasing their positions in companies that focus on shoppers who earn near the average family income of $74,000 annually. These include children’s apparel company Carter’s Inc, department store Big Lots Inc, men’s apparel company Tailored Brands Inc and discount retailer Wal-Mart Stores Inc.

With unemployment at 17-year lows, companies are having a hard time filling low to middle-income jobs. As a result, wages for those workers are expected to rise more than 3 percent this year, the largest increase in the category since April 2009, according to data from the Federal Reserve Bank of Atlanta.

Given the expected rise in wages and one-time bonuses resulting from the Republican-led tax cut signed into law on Dec. 22, fund managers are betting that workers will spend more, thus helping drive up share prices of retailers.

“As capital comes back to the U.S., labor demand will be stronger and we will see for the first time in a long time wage growth creeping into the U.S. market,” boosting discretionary income and spending, said Jim Brilliant, portfolio manager of the CM Advisors Fixed Income Fund.

Fund managers say they are targeting middle-income shoppers as jobless claims currently near 45-year lows and increased corporate spending push companies to increase wages. As a result, they see more dollars flowing to retailers, some of which suffered declines of 25 percent in their share prices in 2017 on fears that Amazon.com would move into additional business lines and drain business away from them.

For his part. President Donald Trump has accused Amazon.com of not paying enough tax, taking advantage of the U.S. postal system and putting small retailers out of business, but he offered no evidence to back up his criticisms and did not suggest any actions he would take.

Trump has attacked Amazon and its Chief Executive Jeff Bezos several times, and his latest comment came a day after news website Axios reported he was obsessed with the world’s largest online retailer and wanted to rein in its growing power, possibly with federal antitrust or competition laws, Reuters reported.

"Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country...not a level playing field!" Trump tweeted Monday.

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Empty space in regional shopping malls has reportedly soared six-year high in the first quarter as the retail apocalypse continues to intensify.
mall, vacancies, retail, slump
Monday, 02 April 2018 10:34 AM
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