Reis Inc. published the preliminary statistics for the third quarter, which showed further erosion in retail real estate fundamentals.
The vacancy rate at neighborhood and community centers reached another new 17-year high, hitting 10.3 percent during the quarter. The vacancy rate is now 3.6 percentage points above the low of 6.7 percent recorded in the second quarter of 2005. It was the seventh straight quarter with negative absorption. Overall, centers in the 77 markets Reis tracks have posted a cumulative 29.1 million square feet of negative absorption in that time frame. The one silver lining is that the amount of negative absorption in the quarter was 5.3 million square feet. That was a noticeable improvement from the first half of the year when neighborhood and community centers posted negative absorption of more than 8 million square feet in both the first and second quarters. Asking and effective rents also continued to drop and are now at the same levels they were two to three years ago.
The vacancy rate at regional malls reached 8.6 percent, a 3.5 percentage point increase from the cyclical low of 5.1 percent in the second quarter of 2005. This is also the first time in Reis’s 10 year history of tracking regional malls that it has recorded four straight quarters of asking rent declines, and the year-over-year decline of negative 3.5 percent is the largest magnitude of deterioration over a 12 month period on record as well. Rents are now in line with where they were in mid-2006.