taubman mall at short hills new jersey

It’s tough all over.

Asking rents, according to a spring Real Estate Board of New York report, declined 10 to 30 percent year-over-year in 14 of Manhattan’s 17 top retail corridors, and were off by up to 20 percent in Beverly Hills, according to brokers in that city. On certain Manhattan streets, rents had spiraled so high that operating stores became unprofitable for retailers, including Ralph Lauren, which shuttered its Fifth Avenue flagship for the Polo brand. Now, seemingly, rents have nowhere to go but down.

Rents have been slipping at shopping centers in particular where the demand for space has softened since more business began moving online.

The mall vacancy rate in the second quarter of 2017 for neighborhood and community centers was 10 percent, a slight increase over the first quarter’s 9.9 percent, while the national mall vacancy rate increased to 8.1 percent from 7.9 percent, according to Reiss. In tertiary markets, where many C-malls and lesser properties are located, the vacancy rate increased to 13.5 percent in the second quarter from 13.2 percent at the end of 2016.

Rents rose slightly, 0.4 percent in the second quarter, to $20.64 a square foot, according to Reiss. The anemic rent growth in malls and neighborhood and community shopping centers was attributed in part to retailers rationalizing their store fleets as they build omnichannel businesses.

But store closings weren’t the only reason for the glut of retail space in shopping centers. Relatively strong new retail construction with 2.9 million square feet in the second quarter, up from 1.7 million square feet in the first quarter, is also believed to have contributed to the increase in empty space at existing malls.

The three biggest shopping center owners fared better than average. Simon Property Group in the second quarter said its occupancy rate of 95.2 percent declined 40 basis points compared with occupancy at the end of the first quarter. Average base rent rose 3.3 percent to $52.10 a square foot, year over year, reflecting strong retailer demand. Simons’ malls and premium outlets recorded leasing spreads of $8.13 per square foot or 12.9 percent.

Taubman Centers occupancy, excluding lease cancellations, was up 2.8 percent and average rent per square foot rose 1.6 percent. The company said the relatively small number of yields with average lease terms of less than 2.5 years had a significant impact.

Westfield’s half-yearly financial results showed a jump in average specialty store rent at its flagship properties of 10.6 percent to $115 a square foot. The mall giant said it has reduced its reliance on department stores from 42 percent in 2007 to 28 percent this year. Westfield said it’s heartened by e-tailers such as Bonobos, Peloton, Warby Parker, Amazon Books, Misguided and Untuckit opening stores. And while Tesla has been the only car dealer on the lot, Westfield said Jaguar, Range Rover, Hyundai, Ford and Citroën are kicking mall tires.

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