In the fourth quarter, the regional and super regional mall vacancy rate fell slightly as overall retail vacancies in the U.S. stayed constant. The vacancy rate at the former was 9 percent compared to 9.1 percent in the third quarter, as the latter held at 10.2 percent, CNBC reported.
Reis Senior Economist Barbara Denham said, according to CNBC, “Many feared that vacancy rates would soar and rents would plummet. This did not occur as the doomsday prognostications proved to be overblown.”
In the months to come, Denham noted, retailers are forecasted to close many locations (among them Sears and Kmart, with the fate of the bankrupt Sears chain still uncertain). Those would happen following the close of the holiday season in the first quarter — and when retailers have a more solid understanding of their current position. At the same time, Reis forecasts that retail vacancy rates will “hold steady this year.”
That state of rates, according to the report, could happen as rents increase a bit but stay under the rate of inflation. According to Reis, the average mall rent rose by 0.2 percent over the fourth quarter following a decline of 0.3 percent in the period that came before. Cities like Austin and Orlando saw the most growth in retail rents, as cities such as Cleveland and Salt Lake City saw the largest drops.
As brick-and-mortar retailers are closing hundreds of stores, immersive destinations are said to help save the retail spaces. Sandler O’Neill + Partners Senior REIT Analyst Alexander Goldfarb told The Wall Street Journal in August, “Mall tenancy has changed. What hasn’t changed is the human desire to socialize.”
Malls are leasing space to gyms, churches and offices to bring in foot traffic. At the same time, co-working sites are predicted to grow at retail properties at a rate of 25 percent through 2023. In the next five years, they are expected to account for around 3.4 million square feet of retail space.