Tuesday, July 08, 2008

Strip Mall Vacancy Rate Increases Sharply in Q2

by Bill McBride on 7/08/2008 10:20:00 AM

From Reuters: US retail property 2nd-qtr worst in 30 yrs - report

U.S. store closings and cutbacks turned the second quarter into the worst for strip mall owners in 30 years ... according to a report by real estate research firm Reis. Strip malls ... saw average vacancies spike 0.5 percentage points to 8.2 percent, a level unseen since 1995 ...

Vacancies at regional malls rose 0.4 percentage points to 6.3 percent, the highest level since the first quarter of 2002, according to the preliminary results.
U.S. Real House Prices vs. Real Consumer Spending Click on image for larger graph in new window.

This graph shows the strip mall vacancy rate since Q2 2007. Note that the graph doesn't start at zero to better show the change.

It was just last quarter that Reis forecast the strip mall vacancy rate to "reach or surpass" 8% by the end of 2008! I guess that forecast needs to be revised.

And it will get worse. As an example these numbers don't include the impact of the recent announcement by Starbucks to close 600 stores and scale back expansion plans. The CRE bust is here.

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