| NEW YORK, July 3
NEW YORK, July 3 U.S. strip mall owners
struggled with a lack of demand in the second quarter, although
limited construction of new space led to a modest improvement in
vacancy rates and slightly higher rents, according to a report
released on Wednesday.
The national vacancy rate dropped to 10.5 percent last
quarter from 10.6 percent the previous period, according to the
report by real estate research firm Reis Inc. It was the sixth
time in the last seven quarters that the rate dropped by
one-tenth of a percent, with declines driven largely by a dearth
of new construction.
The average asking and effective rents both rose 0.3
percent, as demand just barely exceeded the 914,000 square feet
of new space made available.
"People look at the market and say: 'These buildings are
sitting 10 percent vacant or so, why are we going to build
something new?'" said Ryan Severino, a senior economist at Reis.
Altogether, retailers soaked up 2.453 million square feet of
U.S. neighborhood strip centers - shopping centers typically
anchored by grocery stores or drug stores. That was down from
2.959 million square feet during the first quarter.
Asking rent at the end of the quarter was $19.19 per square
foot per year. Effective rent, which strips out free rent and
other costs landlords incur to attract tenants, was $16.68 per
Regional malls, where department stores typically book-end
smaller specialty stores, had a vacancy rate of 8.3 percent in
the second quarter, flat compared with the prior period.
Top-tier malls in affluent areas are driving improvements in
vacancy rates and asking rents as smaller shopping centers
continue to suffer from weakness in the economy, Severino said.
The top nine markets ranked by lowest vacancy rate are in
California or the New York area suburbs, a trend that aligns
with "Class A" malls outperforming inferior malls, he said.
"There's a pretty big rift in the high-end centers that
cater to the affluent and the other centers that cater to
everyone else," said Severino. "The wealthy are not immune to
the economy, but they're definitely more insulated."
Real-estate companies that own malls and shopping centers in
denser metropolitan areas and wealthier suburbs include Simon
Property Group Inc, General Growth Properties Inc
, Taubman Centers Inc, Kimco Realty Corp
and Equity One Inc.