The Real Deal New York

That empty feeling: Shopping mall vacancies hit a 7-year high

The trend is driving down retail rents nationwide amid surging e-commerce
October 03, 2018 02:00PM

An empty mall with “For Rent” signs (Credit: iStock)

Despite all the doom and gloom over shopping malls, one key figure remained fairly strong. Nationwide, average rents have either stayed the same or ticked up from one quarter to next for the last seven years.

Until now.

In the third quarter, the average rent for malls was $43.25 a square foot — down from $43.36 in the second quarter, the Wall Street Journal reported. Rents had not slid quarter over quarter since 2011, the report said.

At the same time, mall vacancies climbed to 9.1 percent from 8.6 percent in the second quarter, as e-commerce continues to grow. That’s also the highest level since 2011. The Bon-Ton Stores and Sears closings boosted the vacancy rate.

Many lower-end malls have faced an uphill battle despite stronger economic indicators. They have struggled, particularly in areas like Pennsylvania, Ohio and Michigan, which have an oversupply of shopping centers. Earlier this year, large retail vacancies hit an all-time high in the Chicago area.
But one expert was not hitting the panic button just yet.

“The retail sector is still correcting,” Barbara Denham, senior economist with Reis, told the Journal.

On the flip side, malls in more affluent areas are faring well. Higher-end shopping centers with features like restaurants and theaters, and less competition, have been drawing in wealthier customers.

Other mall owners, like Macerich and Hudson Pacific Properties, are seeking alternatives for unused space or shuttered properties, such as bringing in co-working companies and creating flexible office space. [WSJ] — Meenal Vamburkar