WSJ – Slowing Mall Rent Growth Poised for a Challenging 2019

Reis in the News

By Esther Fung
Source: The Wall Street Journal – Slowing Mall Rent Growth Poised for a Challenging 2019

Rental growth rates at U.S. malls and open-air shopping centers eased in the final quarter of 2018 and could slow further this year amid a difficult retail climate and signs of slower economic growth.

The average rent for malls in the fourth quarter rose 0.2% to $43.35 a square foot, up from $43.25 in the third quarter, according to data from real-estate research firm Reis Inc. Mall rents grew by 0.8% in the fourth quarter from a year earlier, down from the 1.5% and 2.0% seen in 2017 and 2016, respectively.

Landlords filled more empty spaces in their centers in the final months of 2018. The vacancy rate for malls fell to 9.0% in the fourth quarter from 9.1% in the third quarter, which was the highest vacancy rate since the third quarter of 2011 when it reached 9.4%, according to Reis.

While limited construction of new malls and open-air shopping centers has helped to temper the oversupply in the retail real-estate sector, landlords are bracing for additional store-closure announcements. Sears Holdings Corp, which filed for bankruptcy protection in October, just ahead of the new year that it will close another 80 stores by March.

“A number of stores are still expected to close in the coming months, and the industry continues to face a number of headwinds including gains in online shopping,” said Barbara Denham, senior economist with Reis.

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