* U.S. regional mall vacancy highest in 11 years
* Regional mall asking rent rose 0.1 pct
* Strip mall vacancy rate flat, nears 21-year-high
By Ilaina Jonas
NEW YORK, Oct 7 The average vacancy rate for large
U.S. shopping malls reached its highest level in 11 years in the
third quarter, as department store closings took effect and
retailers scaled back their floor space due to shaky consumer
sentiment, according to a report issued on Friday.
Preliminary figures by real estate research firm Reis Inc show
the average vacancy rate at regional malls rose to 9.4 percent in
the third quarter, the highest level since Reis began tracking
regional mall vacancy rates in 2000 and up from 9.3 percent in the
Asking rent rose 0.1 percent from the prior quarter to
$38.81 but remained close to 2006 levels. Reis does not provide
rent net of perks such as months of free rent, a figure known
as effective rent for large regional malls.
Unlike the office, apartment or hotel sectors, which have
been staging a recovery in various phases, retail real estate
continued to struggle in the third quarter.
Weak consumer sentiment, which had prompted retail tenants to
scale back or close stores over the past two years, remained
insufficient for store operators to mount a comeback, Reis said.
The summer's political gridlock in Washington and resultant
downgrade of U.S. debt shook consumers and depressed their
shopping habits, Reis added.
That compounded the oversupply of U.S. strip malls during the
quarter, when 17,000 more vacant square feet became available than
The vacancy rate at these local retail strips was 11 percent,
flat with the second quarter, Reis said.
The vacancy rate remained flat in 55 of the 80 metropolitan
areas Reis follows. Effective rents were flat or fell in 52
"With demand remaining so weak and more new completions
anticipated to come online in the remainder of 2011, there is
still a good chance that the vacancy rate will match the 11.1
percent record high observed in 1990 sometime later this year,"
Reis senior economist Ryan Severino said.
But shopping could be making a comeback. In September, 23 U.S.
retailers posted an average sales gain of 5.1 percent at stores
open at least a year, according to Thomson Reuters, getting a
boost from back-to-school shopping, and leading to some optimism
for the holiday season.
"That's why I'm hoping that it's just a short-term
phenomenon," Severino said. "This is the sector that would bear
the brunt of it if it's not the case. Retailers would see that
their sales aren't doing so great. That would halt any progress in
demand for retail real estate."
In the third quarter, the average asking rent at U.S. strip
malls was stuck at $19.02 per square foot, near 2006 levels.
The average effective rent also was flat at $16.54 per square
foot, near 2005 levels.
Big mall owners such as Simon Property Group Inc ,
General Growth Properties Inc and Taubman Centers Inc , as well as strip mall owners Kimco Realty Corp
and Equity One Inc are scheduled to report
third-quarter results in the next few weeks.