The Trends: Retail Retracts

The average vacancy rate for neighborhood and community shopping centers rose from 8.1 percent in the second quarter to 8.4 percent in the third quarter and for regional/super-regional malls from 6.3 to 6.6 percent, according to data released by Reis Inc. during its third-quarter-2008 briefing. The Webcast did not forecast numbers for regional/super-regional malls, but the average vacancy rate for neighborhood and community centers is projected to hit 9.1 percent at the end of the year, 9.9 percent in 2009 and 10.3 percent in 2010. In 2011, however, the vacancy rate is expected to inch back down to 10.2 percent, before returning to a single-digit level of 9.8 percent in 2012. Effective rents for neighborhood and community shopping centers came in at $17.57, down 0.2 percent from the previous quarter’s $17.60. In 2009, Tampa, Jacksonville, Cleveland and Phoenix are projected have the largest declines in effective rents. Austin, Columbia, Portland, Tacoma and Seattle topped markets in rent growth from the third quarter of 2007 to the same period this year.“The decline in home values has had a particularly powerful impact on consumers since, for a majority of U.S. households, home equity is a leading store of wealth,” said Reis chief economist Sam Chandan. “Consumers’ depressed outlook is coincident with the negative wealth that results from falling house prices, as well as the more tangible constraints on household budgets, including stagnant wage income growth.” He added that while incomes grew because of one-time shocks like the fiscal stimulus, consumers refrained from ramping up purchases. “Instead of spending the additional income from the fiscal stimulus, consumers saved,” he said. “Consumer credit continues to tighten as well for residential mortgages and for all other types of credit.”