Retail Slips

Average lease rates at shopping malls during the first quarter were $38.79 a square foot annually, down 3% from a year earlier, according to real-estate research company Reis Inc. That was the sixth consecutive quarterly decline.

Lease rates at shopping centers, which are smaller than malls, declined to $16.62 in the first quarter, down 1% from the prior quarter and down 3.4% from a year earlier. It marked the seventh consecutive quarter in which shopping-center lease rates have declined.

Vacancy rates, meanwhile, continued to rise. Vacancy rates at malls in the top 77 U.S. markets rose to 8.9% in the January-to-March period, up one tenth of a percent from the previous quarter, according to Reis.

Still, the first-quarter increase was slight in comparison to earlier increases, suggesting that a bottom could be near.

The fallout is slightly more severe for U.S. shopping centers, which are often anchored by a grocery store and built so that all stores are directly accessible from a common parking lot. Shopping centers tend to have more local tenants, while malls have more national tenants like Gap Inc. and Foot Locker Inc. Thus, downturns tend to hit shopping centers harder as more of those less-sturdy local tenants miss rent payments or close.

Vacancies at shopping centers in the top 77 U.S. markets increased to 10.8% in the first quarter, up two tenths of a percent from the previous quarter and up 1.3 percentage points from a year earlier, according to Reis.

It is the highest vacancy rate since 1991, when vacancies reached 11%.