According to research firm Reis Inc., retailers shuttered more stores in U.S. shopping centers during the second quarter, further delaying a rebound in the struggling retail real estate market.
Shopping centers and strip malls have been pounded harder than other types of real estate, hurt by weak consumer spending, anemic job growth and an oversuplly built to serve new housing that never materialized.
"Until we see stabilization and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest," said Victor Calanog, Reis director of research.
For U.S. strip centers, the vacancy rate in the second quarter rose 0.10 percentage point from the first quarter to 10.9 percent, slightly below the 11 percent in 1991 during the prior real estate bust, according to the Reis quarterly report, released on Wednesday.
Retailers gave up 1.85 million square feet of occupied space in the second quarter at neighborhood shopping centers, while developers opened less than 400,000 square feet of new strip mall space.
That compares with an average of about 7 million to 8 million square feet of shopping centers built each year from about 2001, according to Reis.
Unlike the office or apartment real estate sectors, a meaningful recovery in retail real estate is expected to be very sluggish, Calanog said.
Rents are not expected to return to 2008 levels before 2016, he said.
"It's really the one sector where because of persistent overbuilding across time, things will really get way down and even a recovery defined by a bottoming out will be pretty tepid," he said.
A recovery also will depend on type of real estate, tenants and location, he added.
Asking rents fell 0.3 percent from the first quarter to $19.07 per square foot, the lowest since the end of 2006, according to the report.
Factoring in months of free rent and other perks landlords offered to attract and retain tenants, effective rent fell 0.5 percent to $16.58 per square foot, the lowest in nearly five years.
Reis said that roughly half of its clients plan to take advantage of the cheap rents in their expansion plans.
"Only about 20 percent expressed such sentiments in the first quarter, and none were in a position to plan for expansion in 2009 for obvious reasons," Calanog said.
"If rents are so cheap now and they can lock it in, maybe it is time to expand," he said. "Some people will benefit from this. But it's not going to be the retail landlord."
At large U.S. malls, the vacancy rate rose 0.10 percentage point from the first quarter to 9 percent, the highest since the first quarter 2000, when Reis began tracking regional malls. Asking rent fell 0.2 percent to $38.72 per square foot, marking the seventh straight quarter of decline. Asking rent was the lowest in more than four years.
Reis does not track effective rent at regional malls.