Archive for the ‘Malls’ Category

After a year of slight improvements in regional mall vacancies and rents, the trend is likely to continue in 2013. According to Reis Inc, vacancies declined and rents rose in the fourth quarter at large regional U.S. malls, which continued to fare better than smaller strip centers burdened by a weak economy and an oversupply of space. Still, real, substantial improvement will not be seen until the economy and labor market pick up and create demand for more retail space.

The brightest spot of the retail mall industry has been the luxury sector with their more-upscale retailers. The sector continues to boast lower vacancies and command higher rents than malls with more mainstream tenants. The better-than-average fundamentals in the luxury sector have been able to raise the performance of all malls in general.

As changing demographics and buying habits continue to damage older, low-quality properties, the outlook does not look good for the future of America’s outmoded malls. According to the CoStar Group, many trade areas are unable to support multiple malls, with dominant properties increasingly attracting shoppers and retailers at the expense of the outmoded centers, which are now so empty that they may be suitable only for demolition.

It is becoming clearer that retail has a finite lifespan and some properties will simply never lease again. Retailers are still actively looking for space, but hundreds of nearly completely vacant malls across the nation are not attractive options for them. This simply means that retail properties are not over-developed more than they are under-demolished. If nothing can be done to make retailers rent up certain space, it is most likely time to get rid of it.

To read the full article from the CoStar Group, click here.

With the economy still only making slow, gradual steps to recovery, stronger malls are able to steal tenants away from weaker ones. According to a new report from Moody’s Investors Service, strong malls have benefitted from a flight to quality properties among retailers, while weak malls are struggling with the sluggish economic recovery and competition from online merchants and other brick and mortar retail formats such as outlets, power centers and lifestyle centers.

Retail as a whole is seeing some light in their own recovery as vacancies fell to 10.9% in the first quarter, the first decline since 2005. Malls are leading the surge with nationwide vacancies dropping to 9.0% in the first quarter; the second straight quarter that sector has seen a reduction. Still though, the vast majority of success is coming from malls that are the only dominant one within a trade area and have four or more department store anchors. Weaker malls without these attributes are seeing vacancies rise more and more.

To read the full article from the National Real Estate Investor, click here.

Investor interest in malls has recently perked up as sales volume on prime retail properties nationwide was up 87% year-over-year to $12.5 billion during the first quarter of 2012. According to Real Estate Forum, from the buyer’s standpoint, the acquisition of a mall can represent a value-add opportunity at this time. For example, many investors are combining proactive management, a focus on leasing, and cosmetic and other improvements to add value to malls through a more pleasant and practical shopping experience. So far this approach has been successful.

Still, despite improved fundamentals in retail and with shopping malls specifically, experts don’t expect many new malls to be coming on line any time soon. You will see new construction here and there in underdeveloped markets, but for the most part you are going to see investors snapping up existing product for repositioning opportunities in place of new development.

To read the full article from Real Estate Forum, click here.