U.S. regional mall occupancies climbed to the highest level in more than four years, led by properties owned by real estate investment trusts, as smaller retail centers recover at a slower pace.
The vacancy rate at malls, which typically include department stores and are larger than neighborhood and community shopping centers, fell to 8.2 percent in the third quarter from 8.7 percent a year earlier, Reis Inc. said in a report. Asking rents rose to an average of $39.77 a square foot from $39.24, the New York-based research firm said.
Regional malls have rebounded faster than smaller shopping centers in part because they offer tenants more foot traffic, climate control and security, according to Victor Calanog, chief economist at Reis. The highest-quality malls, typically owned by REITs and often the dominant center in an area, have much lower vacancies than the industry average, Reis said.
“It’s just a more-preferred property type,” Calanog said in a telephone interview. “They offer more benefits to the tenants.”
Simon Property Group Inc., the largest mall owner, said occupancies at its U.S. properties climbed to 95.1 percent in the second quarter from 94.2 percent a year earlier. The base minimum rent at the Indianapolis-based REIT’s properties was $41.41 a square foot, up from $39.99.
The nationwide mall-vacancy rate peaked at 9.4 percent in the third quarter of 2011, according to Reis. The current rate is the lowest since the first three months of 2009, when it was 7.9 percent.
At neighborhood and community centers, the vacancy rate slipped to 10.5 percent in the third quarter from 10.8 percent a year earlier. The high was 11.1 percent, reached two years ago, according to Reis. Effective rents, or what tenants paid after any landlord discounts, averaged $16.75 a square foot, up from $16.56.
The muted recovery in rents and occupancies has limited new development, helping to boost demand for existing space. Occupied space in neighborhood centers rose by a net 2.35 million square feet in the third quarter, compared with 1.93 million square feet a year earlier, Reis said.
U.S. retail sales rose 0.2 percent in August, after a revised 0.4 percent advance in July, the Commerce Department reported on Sept. 13.