The Real Deal Miami

Strong holiday season could help fill U.S. gaping retail vacancies

December 01, 2011 04:01PM

Higher than anticipated sales on Black Friday have mall owners hoping that the coming holiday season will cure some of the persistent retail vacancy, the Wall Street Journal reported.

Last week’s Black Friday sales totaled $52.2 billion, a record, according to research from the National Retail Federation. Meanwhile in the third quarter malls overall had a 9.4 percent vacancy rate — the highest since numbers began being recorded — according to Reis, a real estate analytics firm.

While mall operators do not rely hugely on holiday sales, the period is a useful bellwether for retail tenants and landlords about what outlets are ready to expand and when and if rents can go up, according to Jay Leupp, a portfolio manager at Lazard Asset Management, an investment manager for institutional clients.

“It’s a better sign and predictor of what retail tenant renewal and expansion activity is going to be going forward, particularly if retail sales are meaningfully stronger than expected,” Leupp said.

Real estate investment trusts dedicated to malls have had 14 percent returns in the last year on a total return basis, compared to the 2.51 percent gain for REITs overall, according to the Dow Jones Equity All REIT Index. However, those figures can be misleading, as REIT-owned malls generally fare far better than malls nationally, due to their access to cheaper capital.

Still, many mall spaces throughout the country remain vacant, the Journal said, as traditionally big box retailers such as Best Buy opt for smaller space, waiting to see if holiday spending remains strong. [WSJ]