Vacancies at U.S. shopping malls and retail strip centers have climbed to steep levels, a trend that Indianapolis-based
commercial real estate companies Simon Property Group Inc. and Kite Realty Group Trust haven't been able to dodge.
Real estate research firm Reis Inc. said the vacancy rate at strip malls reached a 17-year high in the third quarter, and regional mall vacancies were the highest in at least 10 years.
The Providence, R.I.-based firm attributed the gloomy report released last week to the downturn in the U.S. economy, anemic consumer spending and the housing bust.
Nationally, the third-quarter vacancy rate at U.S. strip malls rose 0.3 percentage points from the previous quarter, to 10.3 percent, the highest rate since 1992, Reis said.
Mall vacancy rates rose 0.2 percentage points, to 8.6 percent in the third quarter, the highest vacancy level since Reis began tracking regional malls in 2000, the firm said.
“Our outlook for retail properties as a whole is bleak,” Victor Calanog, Reis director of research, said in the report. “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.”
Simon’s second quarter vacancy rate for the 163 regional malls it owns was 9.1 percent, up from 8.2 percent during the same period of 2008. The company will report third quarter rates when it releases its quarterly financial report Oct. 29.
The vacancy rate for Kite’s 51 properties climbed from 7 percent in the second quarter of 2008 to 8.3 percent in the same period this year. The company is scheduled to report third quarter information Nov. 5.
Bill French, senior vice president and retail specialist for commercial real estate firm Colliers Turley Martin Tucker, said the retail climate might be the worst he’s seen in his 25-year career.
“We’ve got more space than ever before,” he said, “yet we don’t have as many tenants.”
Too much supply, coupled with a credit crunch that has hindered the ability of retailers to borrow money, has led to a “perfect storm,” French said.