Magazine article Mortgage Banking

Pullback in Retail Construction Follows Consumer Response

Magazine article Mortgage Banking

Pullback in Retail Construction Follows Consumer Response

Article excerpt

A "severe" pullback in new construction kept retail vacancies at 10.9 percent during the first quarter this year while regional mall vacancies increased 40 basis points to 9.1 percent, according to Reis Inc., New York.

"This latest increase appears to be driven by echo effects from anchor vacancies that spiked in 2009 and 2010 other anchor and non-anchor tenants have begun to look for other options or scaled back on their need for space," said Victor Calanog, director of research at Reis.

Regional malls had the highest vacancy level since Reis started publishing regional mall data in the first quarter of 2000; the firm expects 14 million square feet of new retail properties to come online this year, which is nearly triple from 2010.

"Unless another round of delays and cancellations [pushes] these projects back to 2012, expect the vacancy rate to break the 11.1 percent record high observed in 1990 sometime later this year," Calanog said.

Reis reported asking and effective rents down by 0.1 percent during the first quarter--the 11th straight quarter since late 2008 that strip malls experienced either flat or deteriorating rents. And with rising food and energy prices, the outlook for consumer spending at malls appears dim.

A new study from Deloitte, New York, said nearly three quarters of consumers believe higher energy prices, political unrest outside the United States and medical costs could slow spending in the months ahead.

More than 70 percent of respondents expressed concerns about higher energy prices, up from 54 percent last year, and 47 percent pointed to higher medical costs as a concern while 43 percent of consumers said the economy is still in a recession. …

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