U.S. retail vacancy drops to its lowest level in four years
The average vacancy rate for the U.S. retail sector has dropped to its lowest level in nearly four years. According to Reis Inc., the average vacancy rate for retail sits at 10.5 percent after the second quarter, down from 10.6 percent in the first quarter.
Within the retail sector, regional malls posted a vacancy rate of 8.3 percent, down from 8.9 percent at the end of second quarter 2012. Strip shopping centers saw a vacancy rate decrease of 30 basis points from 10.8 percent a year ago to 10.5 percent in the second quarter.
The retail sector has experienced steady gains recently as the improving economy and housing market boost consumer confidence and consumer spending. As of May, retail sales are up 4.3 percent from the past year, according to the Commerce Department.
Ryan Severino, senior economist and associate director of research at Reis, explains, “while the statement about it being the lowest level in more than three years is technically correct, demand [for retail space] has slowly increased while new supply has been virtually nonexistent.”
Severino further describes the recovery as “relatively weak,” considering the vacancy rate was at 11.1 percent at the close of third quarter 2011, nearly two years ago. He adds that the markets that have seen the most improvement year-over-year are San Francisco, San Jose, New York City, Houston and Dallas.