NEW YORK (Reuters) - Vacancies surged at U.S. strip malls in the first quarter and set a record at U.S. regional malls, as the deterioration in the retail real estate sector accelerated, according to real estate research firm Reis.
Barring a significant economic change, Reis does not expect vacancies to stabilize until sometime in the middle of 2012 if an overall U.S. economic recovery appears next year.
“I’m extremely skeptical,” Reis Research Director Victor Calanog said. “This is the first pullback we’ve seen in 17 years that really affected retail properties directly.”
Vacancies at U.S. strip malls rose to 9.5 percent, up 0.6 percentage point, the largest single quarterly rise since Reis began publishing quarterly figures in 1999, Reis said in a quarterly report released on Wednesday.
“In comparison to what was already a tough 2008, neighborhood and community centers returned more space to the market in the first quarter of 2009 than all of the four quarters of 2008 combined,” Calanog said. In just one quarter, 8.7 million of excess square feet of space was left on the market, more than in all of 2008, Reis said.
The consumer-led recession has slammed retailers, driving many out of business and leaving landlords saddled with shuttered stores.
“There is little current basis for any optimism required to maintain or increase spending and therefore keep retail businesses afloat,” Calanog said.
The soaring vacancy rate pushed asking rents down to $19.44 per square, down 0.6 percent, the largest single-quarter decline on Reis’ records.
Factoring in free-months rent and other concessions, effective rents swooned, falling 1.8 percent in the first quarter, a steeper decline than was seen through all of 2008. The effective rent decrease, to $17.11 per square foot, was the largest single-quarter decline on record.
At large U.S. regional malls, overall vacancy reached a record 8 percent in the first quarter, up 0.90 percentage point, also the largest rise in vacancy for a single quarter.
Asking rents for regional malls fell to $39.99 per square foot, down 1.2 percent, the greatest decline since the first quarter of 2004.
Reporting by Ilaina Jonas, editing by Gerald E. McCormick