New York — Malls in the top 77 U.S. markets posted an average vacancy rate of 8.7 percent during the third quarter, down from 8.9 percent from the previous quarter, according to a recent report by the Wall Street Journal. The declining vacancies came about as landlords attracted new tenants to fill the space left by big-box retailers, such as Best Buy, Staples, Gap and Office Depot, as they downsized or shut down some of their units. The third quarter figure for this year is a huge step down from last year's third quarter high of 9.4 percent.
While mall vacancies were on the decline, strip center vacancies remained the same. Retail centers averaged a 10.8 percent vacancy in the third quarter, unchanged from the previous quarter, according to the WSJ, which gathered its data from real-estate research company Reis Inc. That figure is only slightly less than last year's fourth quarter high of 11 percent.
These decreased vacancy rates come despite increased rental rates in the market. Mall rents slowly rose 0.3 percent in the third quarter to an average of $39.24 per square foot, marking the fifth consecutive quarter of increased rates for malls. Rents at retail strips continued through a third consecutive quarter of increases as well to $16.57 per square foot, increasing 0.1 percent from the previous quarter.
Even though several retailers are closing shop, there are some companies looking to expand to take advantage of the abundance of new development hitting the market. WSJ cites Ulta Beauty as one of the main companies expanding in the near future. The company, which currently operates 489 stores, expects to open 100 additional locations in its 2012 fiscal year.
The Santana Row shopping center in San Jose, California is another prime example of a center witnessing big-box closings amid new tenant arrivals. H&M opened a 28,000-square-foot store in the third quarter, occupying the space of a former Borders. Burberry also closed its 5,000-square-foot location at the center, while new arrivals include Kate Spade New York, New Zealand-based Ice Breaker and an outpost of the Veggie Grill restaurant chain.
While shopping centers have encountered hard times during the economic downturn, landlords will be helped as an abundance of new development will hit the retail market, further allowing companies like Ulta Beauty, TJ Maxx and Marshalls to expand.
You can read the full Wall Street Journal article by clicking here.