U.S. mall vacancies see slight drop, signs of stability for overall retail vacancies

By

Gabriella Lacombe

Published
Jan 4, 2019

While a celebration isn't quite in order, it appears the retail sector has weathered the storm of store closures seen in 2018, especially in malls. According to a survey released by real estate research firm Reis, vacancy rates at regional and super-regional malls clocked in at 9 percent in the fourth quarter of the year, dropping from the seven-year high of 9.1 percent seen in the third quarter. 

This figure is still up from the vacancy rate of 2017's closing 8.3 percent, and a 10-year average of 8.4 percent during the fourth quarter. Overall, the limited fluctuation shows a relatively survivable – if not exactly positive – outcome. 

"Given the many store closures across the U.S., the minimal changes in vacancy rates show how the retail sector has withstood the structural changes in the industry," Reis senior economist Barbara Denham told CNBC. "Many feared that vacancy rates would soar and rents would plummet. This did not occur as the doomsday prognostications proved to be overblown."

However, retailers should not expect the beginnings of a reversal for 2019. Denham went on to tell CNBC that a variety of retailers are expected to close several locations in the beginning of this year, particularly in the first quarter, when the holiday season has ended and companies have a more precise outlook for the new year. 

The Reis survey showed that average mall rent was up by 0.2 percent during the fourth quarter, effectively ousting low-performing businesses. This means trouble for struggling retailers like Sears, CNBC noted, a company that recently put up $4.6 billion to save its remaining stores from total liquidation.

From a wider perspective, Orlando, Raleigh-Durham, Austin and Richmond all ranked in with the highest retail rent growth among U.S. cities throughout the latest quarter, Reis said, while Salt Lake City and Cleveland took the greatest dives. 

Overall, the survey showed that U.S. retail vacancies stayed at 10.2 percent during this latest quarter.