Retail vacancy levels stayed relatively flat for the first quarter of the year, according to preliminary data from real estate research firm Reis. Industry experts say that despite accounts of retail bankruptcies and store closures, the sector is poised to stay the course.
For neighborhood and community shopping centers, the vacancy rate averaged 10.0 percent, the same as the quarter before. Meanwhile, the vacancy rate for regional malls rose 10 basis points from the fourth quarter to 8.4 percent.
This rate has remained relatively unchanged for several quarters, signaling that 2018 is not likely to see a major disruption to retail occupancies, says Barbara Byrne Denham, a senior economist at Reis. Denham points out the particularly rough start the retail sector saw in 2017. “It can’t get that much worse,” she says.
Denham notes she has been starting to see the demolition of shopping centers for other development, which is slightly boosting occupancy statistics. But more importantly, otherlarge users—particularly fitness centers—have stepped up to absorb some of the excess retail space, she says. “That’s why things aren’t suffering too greatly, but we do see some pretty dark clouds on the horizon for the third and fourth quarter of this year,” Denham adds.
Asking and effecting rates for neighborhood and community shopping centers increased, but barely, by just 0.4 percent from the fourth to the first quarter, Reis data shows. Net absorption remained positive as well, but also represented the lowest quarterly total in more than five years. For malls, rents rose by 0.5 percent. “It’s kind of like two steps forward, three steps back,” Denham says.
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