* U.S. strip mall vacancy hits 10.9 pct
* U.S. mall vacancy reaches 10-year high
* Recovery expected to be weak and prolonged
By Ilaina Jonas
NEW YORK, July 7 Retailers shuttered more
stores in U.S. shopping centers during the second quarter,
further delaying a rebound in the struggling retail real estate
market, according to research firm Reis Inc.
Shopping centers and strip malls have been pounded harder
than other types of real estate, hurt by weak consumer
spending, anemic job growth and an oversupply built to serve
new housing that never materialized.
"Until we see stabilization and recovery take root in both
consumer spending and business spending and employment, we do
not foresee a recovery in the retail sector until late 2012 at
the earliest," said Victor Calanog, Reis director of research.
For U.S. strip centers, the vacancy rate in the second
quarter rose 0.10 percentage point from the first quarter to
10.9 percent, slightly below the 11 percent in 1991 during the
prior real estate bust, according to the Reis quarterly
report, released on Wednesday.
Retailers gave up 1.85 million square feet of occupied
space in the second quarter at neighborhood shopping centers,
while developers opened less than 400,000 square feet of new
strip mall space.
That compares with an average of about 7 million to 8
million square feet of shopping centers built each year from
about 2001, according to Reis.
Unlike the office or apartment real estate sectors, a
meaningful recovery in retail real estate is expected to be
very sluggish, Calanog said.
Rents are not expected to return to 2008 levels before
2016, he said.
"It's really the one sector where because of persistent
overbuilding across time, things will really get way down and
even a recovery defined by a bottoming out will be pretty
tepid," he said.
A recovery also will depend on type of real estate, tenants
and location, he added.
(Graphics on the U.S. retail real estate market:
Asking rents fell 0.3 percent from the first quarter to
$19.07 per square foot, the lowest since the end of 2006,
according to the report.
Factoring in months of free rent and other perks landlords
offered to attract and retain tenants, effective rent fell 0.5
percent to $16.58 per square foot, the lowest in nearly five
Reis said that roughly half of its clients plan to take
advantage of the cheap rents in their expansion plans.
"Only about 20 percent expressed such sentiments in the
first quarter, and none were in a position to plan for
expansion in 2009 for obvious reasons," Calanog said.
"If rents are so cheap now and they can lock it in, maybe
it is time to expand," he said. "Some people will benefit from
this. But it's not going to be the retail landlord."
At large U.S. malls, the vacancy rate rose 0.10 percentage
point from the first quarter to 9 percent, the highest since
the first quarter 2000, when Reis began tracking regional
malls. Asking rent fell 0.2 percent to $38.72 per square foot,
marking the seventh straight quarter of decline. Asking rent
was the lowest in more than four years.
Reis does not track effective rent at regional malls.
Some publicly traded real retail real estate landlords are
expected to fare better than the overall market. Many of them,
including Simon Property Group (SPG.N), Kimco Realty Corp
(KIM.N), Developers Diversified Realty Corp (DDR.N) and Equity
One Inc (EQY.N), are scheduled to issue second-quarter reports
starting the end of July.
(Reporting by Ilaina Jonas; Editing by Steve Orlofsky)