Mall vacancy rate hits all-time high

Stores sit vacant as retail sector claws back from pandemic

National /
Apr.April 08, 2021 03:49 PM
The vacancy rate for regional and superregional malls is at an all-time high. (Getty)

The vacancy rate for regional and superregional malls is at an all-time high. (Getty)

It’s not just office and residential landlords who need to worry about soaring vacancy rates.

The vacancy rate for regional and superregional malls hit 11.4 percent in the first quarter of 2021, the highest it’s ever been. That’s up from 10.5 percent in the fourth quarter of 2020 — an increase of 90 basis points in a single quarter, according to a report by Moody’s Analytics.

“Retail is slogging through the evolutionary process that started well before the pandemic,” the report reads. “Malls are of more concern than neighborhood centers, but even then, it is unlikely that we will close down every single mall in the U.S.”

For malls, heightened vacancy rates are especially terrifying as the closure of certain stores, or a large number or stores, can trigger co-tenancy clauses, which allow other tenants to lower rents or exit leases.

As a whole, the retail sector is still trying to claw its way back from the early days of the pandemic. The vacancy rate is at 10.6 percent — although that’s only a 0.4 percent decrease from the same time last year.

Effective rents — those that include some kind of incentive from the landlord — and asking rents have both fallen, to $18.58 per square foot and $21.32 per square foot, respectively. That’s a 1.5 percent and 1 percent year over year decrease respectively.

Of the 77 metro areas that Moody’s tracks, 40 recorded a decline in effective rent in the first quarter. Still, the report notes, that’s a decrease from the 60 metro areas that saw rents decline in the previous quarter.

But there may be some hope on the horizon. A Placer.ai analysis of foot traffic at 50 malls across the country found that visits last month were just 24 percent below those in March 2019 — using that year, instead of 2020, as it shows what a normal period should look like. Though that may not seem great, that gap is the lowest since the pandemic began.





    Related Articles

    arrow_forward_ios
    JLL CEO Christian Ulbrich. (Getty)
    JLL explores sale of China property management wing
    JLL explores sale of China property management wing
    Dollar General CEO Todd Vasos (Retail Industry Leaders Association, iStock)
    Dollar General thrives amid retail apocalypse
    Dollar General thrives amid retail apocalypse
    Bill Lee (Lee & Associates/YouTube)
    Lee & Associates founder Bill Lee dies
    Lee & Associates founder Bill Lee dies
    (Getty)
    Manhattan retail market awaits recovery as vacancies rise in Q1
    Manhattan retail market awaits recovery as vacancies rise in Q1
    (Getty, iStock)
    McDonald’s to shutter hundreds of Walmart outposts
    McDonald’s to shutter hundreds of Walmart outposts
    Rudin Management’s Michael Rudin and Industrious’ Justin Stewart with 32 Sixth Avenue in Tribeca (Rudin, Industrious, Google Maps)
    Rudin teams up with Industrious for flex-office play
    Rudin teams up with Industrious for flex-office play
    Mitchell Kossoff (iStock, Kossoff, PLLC/Illustration by Kevin Rebong for The Real Deal)
    Landlords seeking millions from real estate attorney who disappeared
    Landlords seeking millions from real estate attorney who disappeared
    Gores Group’s Alec Gores and Dean Metropoulos with Sonder CEO Francis Davidson (Getty, Linkedin)
    Sonder considers going public via SPAC
    Sonder considers going public via SPAC
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...