U.S. mall vacancy rate soars, rent dives - report

* US strip mall vacancy reaches 10 pct

* US regional mall vacancy hits 8.4 pct

By Ilaina Jonas

NEW YORK, July 8 (Reuters) - The vacancy rate at U.S. strip
malls reached a 17-year high in the second quarter, and empty
space at regional malls struck a nine-year record as more
retailers downsized or went out of business altogether,
according to a leading real estate research firm.

The consumer-led U.S. recession has hurt retailers hard and
pummeled their landlords, forcing many store owners at
neighborhood shopping centers and malls to shutter their
businesses. Those still alive have reduced their space needs or
negotiated for lower rental rates.

Falling incomes of landlords have made it increasingly
difficult for them to meet loan payments and may fuel an
already-rising rate of defaults within the retail real estate
sector.

"It doesn't take much to knock your incomes down if you've
levered up," said Victor Calanog, director of research for Reis
Inc, which released its quarterly report on Wednesday. "There's
just no support for income-generating properties being able to
meet fixed-debt obligations."

During the second quarter, the vacancy rate at U.S. strip
malls reached 10 percent, the highest level since 1992, the
report said.

Meanwhile, asking rent fell 1.7 percent from a year ago to
$19.28 per square foot. Asking rent fell 0.7 percent from the
prior quarter. It was the largest single-quarter decline since
Reis began tracking quarterly figures in 1999.

Factoring in months of free rent and other concessions,
effective rent declined 3.2 percent year-over-year to $17.01
per square foot. Effective rent fell 1.1 percent from the prior
quarter.

About 7.9 million square feet of space was returned to the
market during the quarter. The amount was second only to the
8.1 million square feet in the first quarter.

The picture was no prettier for U.S. regional malls, whose
vacancy rate rose to 8.4 percent, the highest vacancy level
since Reis began tracking regional malls in 2000.

Asking rents for regional malls continued to deteriorate
but at a faster rate, falling 1.4 percent in the second
quarter, compared with 1.2 percent in the first. Year-over-year
asking rent fell 2.9 percent to $39.42 per square foot.

Rising U.S. unemployment and soaring home foreclosures
point to a longer recession and greater insecurity among
consumers. With a dearth of positive indicators, it does not
look like a green shoot of recovery will be able to fend off
deteriorating rents and occupancies in the sector.

"Right now it looks like all signs are pointing to rents
and vacancies, big components of income, getting shot down,"
Calanog said. "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."

That does not bode well for mall owner General Growth
Properties Inc (GGWPQ.PK), which filed for bankruptcy
protection in April, after it failed to refinance maturing
loans.

It also could translate into tougher business conditions
for shopping center owners, such as Cedar Shopping Centers Inc
(CDR.N), Equity One Inc (EQY.N) and Kimco Realty Corp (KIM.N).
(Reporting by Ilaina Jonas, editing by Matthew Lewis)