The U.S. retail vacancy rate inched 0.1% higher to 10.2% in the fourth quarter of 2019 amid the decline of overall occupancy stemming from the closure of 16 Kmart Corp. stores across 13 metropolitan areas, according to Reis Inc.
The national average asking and effective rents rose 1.2% and 1.3%, respectively, during the quarter, marking the lowest annual growth rates since 2013. The regional mall vacancy rate jumped 0.3%, to 9.7% during the period, while rent growth remained flat.
Net absorption was negative 175,000 square feet, largely driven by the closure of two Kmart stores in each of Philadelphia, central New Jersey and Norfolk, Va. The three markets alone posted 585,000 square feet of new vacancy. The fourth quarter saw the lowest quarterly completions since 2011, with new construction totaling 543,000 square feet.
The vacancy rate increased in 27 out of 77 metros, down from 30 in the third quarter of 2019. The highest vacancy rates were logged in Syracuse, N.Y.; Pittsburgh; Columbia, S.C.; Long Island, N.Y.; and Greensboro/Winston-Salem, N.C.
Rents fell in 29 metro areas, up from 20 metros in the third quarter. The largest declines were seen in Chattanooga, Tenn.; Fairfield County, Conn.; Dayton, Ohio; central New Jersey; and Greensboro/Winston-Salem.
The highest effective rent growth rates in 2019 were recorded in Nashville, Tenn.; Seattle; Sacramento, Calif.; Raleigh-Durham, N.C.; and Salt Lake City, which all reported gains of 2.3% to 3.4%. Effective rents declined year over year in seven metros, led by Fairfield County; Little Rock, Ark.; Pittsburgh; Chattanooga; and Lexington, Ky.
The last quarter of 2019 appears to signal the outset of a slowing retail market, supported by the increase in retail and regional mall vacancy rates and with 59 out of 82 metros experiencing a decline in retail jobs year over year, according to the research firm.