The national vacancy rate for neighborhood and communityshopping centers in the U.S. increased 10 basis points to 10% in the thirdquarter, while the vacancy rate for regional malls declined by 10 basis points to7.8% after a rise in the previous quarter, according to Reis Inc.
The vacancy rates of the two retail types were split inopposite directions for the second consecutive quarter. Reis said regionalmalls have outperformed neighborhood and community centers throughout therecovery period, bolstered by class A malls catering to wealthier customers.
For neighborhood and community shopping centers, asking andeffective rents increased 0.4% in the third quarter and grew 1.9% year overyear. This marks a deceleration from previous annual growth rates of more than2%, and the slow rate is expected to continue in the next few quarters in theabsence of a significant drop in the vacancy rate.
Overall, San Jose, Calif.; Tampa-St. Petersburg, Fla.;Raleigh-Durham, N.C.; and Dallas saw the highest quarterly rent growth, whileCharlotte, N.C., was among six markets that saw rent declines. Upto 25 metro areas saw vacancy rate increases of more than 10 basis points,including past outperformers San Francisco; Palm Beach, Fla.; and Seattle.
Net absorption for neighborhood and community shoppingcenters fell to the lowest level since 2011 at 143,000 square feet, from anaverage of almost 3 million square feet in the previous three quarters. Thedrop in absorption is likely to be a delayed fallout from the first quarter'sshaky economic condition, Reis said.
New completions for neighborhood and community centerstotaled 2.53 million square feet, up from 1.93 million square feet in thesecond quarter. Reis said the construction level, while healthy, remains farbelow that seen in previous recoveries, and that any increase in constructionseems "puzzling," given the 10% vacancy rate.
Reis characterized the limited construction in neighborhoodand community centers as more of a structural shift than a cyclical occurrence,due to increased competition from newer retail concepts.
Regional malls' asking rents increased 0.5% in the quarter,and 2.1% annually. Reis says there continues to be a split in the market ashigh-end malls in wealthy areas outperformed older malls in less wealthy areas.Additionally, many malls are signing up nontraditional tenants, including yogastudios, urgent medical care centers and entertainment venues, in efforts tocompensate for e-commerce-induced store closings.