Retail Rebound Thanks to Housing?

July 8, 2013

The average vacancy rate of retail property fell to its lowest level in more than three years in the second quarter, now at 10.5 percent, according to Reis Inc., a real estate research firm. 

The recovering economy is helping retail landlords fill empty spaces and charge more for rent, The Wall Street Journal reports. Some analysts are attributing that recovery to consumers spending more due to the recovering housing market. 

"When you see home prices starting to grow again, when you see the job market slowly recovering, all those things have come into play to add more stability" in the retail sector, says Jim Schutter, a retail expert with the brokerage Newmark Grubb Knight Frank.

The vacancy rate at malls was 8.3 percent at the end of the second quarter, posting its lowest rate in more than four years. Vacancy rates at strip-shopping centers was at 10.5 percent, a decrease from 10.8 percent a year ago. 

Despite the improvement, vacancy rates are still elevated compared to prior to the recession. In the first quarter of 2008, the vacancy rate was 7.7 percent—compared to 10.5 percent today. 

However, the retail market is expected to progress in the coming months because new development had grinded mostly to a halt during the recession. According to the CoStar Group, about 31.5 million square feet of new retail space is expected to pop up this year—that compares with about 200 million in 2007 and 2008.

Source: “Retail Vacancies Lowest in 4 Years,” The Wall Street Journal (July 3, 2013)

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