According to Reis Inc., retail vacancy rates jumped considerably during the second quarter and its metrics for neighborhood and community centers and for regional malls each hit new highs.
For neighborhood and community centers, net absorption for the quarter amounted to negative 7.9 million square feet—greater than the negative absorption for all four quarters of 2008 combined. The figure was down only slightly from the 8.1 million square feet of negative absorption posted in the first quarter. The vacancy rate jumped to 10.0 percent—the highest level since 1992. Year over year effective rents are down 3.2 percent and effective rents dropped 1.1 percent between the first quarter and the second quarter.
According to Victor Calanog, director of research for Reis, “Asking and effective rents also registered record high declines as retail property landlords faced continuing pressure from tenants who were downsizing space requirements, negotiating more favorable lease terms, or going out of business altogether. From a forward-looking perspective, this is in line with Reis's expectations, given the tremendous pressure assailing consumers and businesses.”
Last quarter Reis projected asking rent declines of over 2.0 percent and effective rent declines of over 4.0 percent for 2009, and year-to-date figures are on track with this outlook.
On the regional mall front, the vacancy rate hit 8.4 percent—the highest figure since Reis began tracking regional malls in 2000. Asking rents for regional malls fell by 1.4 percent in a single quarter, a larger decline relative to the negative 1.2 percent growth in the first quarter. “The last time we saw rent declines of this magnitude was in the second quarter of 2002, a period of overall economic weakness immediately following the tragic events of 9/11,” Calanog wrote.