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Slowing Mall Rent Growth Portends A Challenging 2019 (#GotBitcoin?)

Slowing Mall Rent Growth Portends A Challenging 2019 (#GotBitcoin?)
Empty Shopping Malls

Average rents in U.S. shopping malls gained less than 1% in the fourth quarter from a year earlier. Slowing Mall Rent Growth Portends 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.

Slowing Mall Rent Growth Portends A Challenging 2019 (#GotBitcoin?)
Rising Vacancies

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.

The tepid retail real-estate market could see a further shakeout in the coming months if economic indicators continue to show that the U.S. economy is cooling. Manufacturing growth slowed sharply in December, while turbulence in stock markets during the final months of 2018 appears to be extending into the new year.

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