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Rents and occupancies at U.S. shopping centers rose in the second quarter amid little development of properties, research company Reis Inc. said.
Occupied space rose by a net 2.06 million square feet (191,000 square meters), the third-largest addition since the slump for neighborhood and community shopping centers began in the first quarter of 2008, according to a report today (July 5) by New York-based Reis. The so-called net absorption figure compared with a loss of 39,000 square feet a year earlier.
“The second-quarter results provided heartening evidence that a slow recovery in neighborhood and community shopping centers is beginning to take root,” Ryan Severino, a Reis senior economist, said in the report. Still, “we remain cautious about pronouncing a turnaround until we observe a couple more quarters of improvement.”
Vacancies are falling from at least a 12-year high — first reached in the fourth quarter of 2010 and repeated for most of last year — as a low level of shopping-center construction limits availability, Reis said.
About 572,000 square feet of new space came online in the three months ended June 30, the second- lowest quarterly figure in Reis records dating to 1999.
Shopping-center vacancies dropped for a second consecutive quarter to 10.8%, down from 10.9% in the previous three months and 11% a year earlier, Reis said. Effective rents, or what’s paid after any landlord discounts, averaged $16.55 a square foot, up from $16.49 a year earlier.
U.S. same-store sales, excluding Wal-Mart Stores Inc. locations, rose 0.2% in June from a year earlier, following a 1.7% increase in May, the International Council of Shopping Centers reported.
Shares of shopping center owners are the second-best performing group of real estate investment trusts this year. The Bloomberg shopping center REIT index rose 20% this year through yesterday, trailing only the Bloomberg mall REIT index, which gained 22%.
“We’re seeing improvement in occupancy, leasing spreads, renewals — all of the different metrics that we measure on a quarterly basis,” David Henry, chief executive officer of Kimco Realty Corp., the largest U.S. owner of community shopping centers, said in a June presentation at a conference in New York. “They are all getting stronger.”
At regional malls, which typically include department stores and are larger than neighborhood and community shopping centers, vacancies fell to 8.9% in the second quarter from 9.3% a year earlier, and rents rose to $39.12 a square foot from $38.77.