U.S. Retail Center Vacancies Rise to 17-Year High, Reis Says

By Daniel Taub

Oct. 8 (Bloomberg) -- Vacancies at U.S. shopping centers rose in the third quarter to a 17-year high as unemployment climbed, consumers cut spending and stores closed, real estate research company Reis Inc. said.

Vacancies at neighborhood and community shopping centers increased to 10.3 percent, the highest level since 1992, from 8.4 percent a year earlier, New York-based Reis said today. Vacancies at regional and super-regional malls rose to 8.6 percent from 6.6 percent a year earlier, a high for this decade.

“Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest,” Victor Calanog, Reis research director, said in a statement.

U.S. payrolls dropped by 263,000 in September and the unemployment rate rose to 9.8 percent, the highest since 1983, according to Labor Department data. Retail sales excluding automobiles, gas stations and restaurants fell 4.3 percent in August from a year earlier, according to the Washington-based National Retail Federation.

Occupied space at neighborhood and community shopping centers dropped by 5.3 million square feet in the third quarter while developers added less than 600,000 square feet that went empty, Reis said.

The average asking rent at shopping centers dropped to the lowest since the first quarter of 2007: $19.22 a square foot, compared with $19.59 a year earlier.

‘Daunting to Observe’

“It is daunting to observe this acceleration in decline in what has traditionally been regarded as a stable property type,” Calanog said.

Neighborhood shopping centers tend to be 30,000 to 150,000 square feet and are home mainly to convenience retailers. Community shopping centers are 100,000 to 350,000 square feet and may include a discount department or home-improvement store, according to the International Council of Shopping Centers.

At regional and super-regional malls, asking rents fell to $39.18 a square foot from $40.62 a year earlier, Reis said. The 3.5 percent decline represents the worst year-over-year deterioration in a decade, Reis said.

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

“Continuing job losses and inconsistent consumer spending patterns will weigh on retail properties for at least another 18 to 24 months,” Calanog said.