by Bill McBride on 1/06/2017 03:00:00 PM
Friday, January 06, 2017
Reis reported that the vacancy rate for regional malls was 7.8% in Q4 2016, unchanged from Q3, and unchanged from 7.8% in Q4 2015. This is down from a cycle peak of 9.4% in Q3 2011.
For Neighborhood and Community malls (strip malls), the vacancy rate was 9.9% in Q4, unchanged from Q3, and down from 10.0% in Q4 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011.
Comments from Reis Economist Barbara Byrne Denham :
Although net absorption was positive, the U.S. vacancy rate for neighborhood and community shopping centers was flat at 9.9%. The national retail average asking rent grew 0.4% for the quarter, as was the effective rent growth rate which was in line with previous quarters. For the year, asking rents increased 1.8% while effective rents increased 1.9%.Click on graph for larger image.
The statistics for Malls tell a similar story: a flat vacancy rate and very little change in asking or effective rents. The regional mall vacancy rate was 7.8% -- no change from last quarter or from the fourth quarter of 2015. Asking rents increased 0.4% for the quarter and 2.0% for the year.
In short, the fourth quarter statistics show that the growth in e-commerce that has led to scores of store closures across the U.S. is truly starting to impact many retail property markets in a meaningful way. Evidence of this came earlier this week when both Macy's and Sears/Kmart announced more store closures.
This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.
In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.
Currently, both the strip mall and regional mall vacancy rates are mostly moving sideways at an elevated level.
Mall vacancy data courtesy of Reis.