Over the years, malls and shopping centers have been historically filled by brand name retailers, until recently, as many locations battle with the harsh reality of decreased foot traffic, expensive leases and possible bankruptcy in the wake of the recession. In turn, property and leasing managers have been faced with the challenge to fill vacant shops abandoned by their usual tenants, forcing them to renegotiate leases, whether in cost or terms, and entertain the thought of some unconventional tenants. As Greg Maloney, president and CEO of Jones Lang LaSalle Retail, explains to USA Today, “We’re taking a look at anything to generate traffic,” which includes mom and pops and independents more commonly found in a brick and mortar on Main Street.
Indies Filling Malls and Increasing Foot Traffic
While such tenants may seem out of character, they are undoubtedly welcome, as vacancy becomes a matter of mall survival. Fortunately, the investment in strange and new storefronts led to one of the strongest fourth quarters since the recession, in terms of rising rents and occupancies, according to the Wall Street Journal (WSJ). “Malls in the top 80 U.S. markets posted an average vacancy rate of 9.2 percent in the fourth quarter, down from the 11 year high of 9.4 percent in the third quarter, according to data service, Reis Inc., which began tracking mall data in 2000,” reports the WSJ. Retail landlords have also seen the positive effect from limited new store construction, allowing for less competition in terms of attracting tenants.
But who knows how long indies will remain ideal tenants, as the average annual rent at U.S. malls is now on the rise. According to WSJ, “Mall rents had been mostly flat or declining since 2008,” allowing for better terms and lease rates for mom and pops with tight budgets. But as Reis just reported, “The average annual rent at U.S. malls rose to $38.92 a square foot in the fourth quarter (2011), a 0.3 percent increase from the third quarter and the second consecutive quarterly gain.”
This story has been adapted from an original piece by the Wall Street Journal.