|Burbank Town Center's traditional enclosed mall|
Now, during the recovery phase, an interesting pattern is taking shape. Though standalone stores and open shopping centers are still feeling the pinch, enclosed malls are rebounding at a much faster rate. Part of this has to do with the upper end retail apparel options at malls, merchandise that consumers prefer to see, try on and buy in person.
Hunter Communications Original News Source:
The Wall Street Journal
Link to article:
Large Shopping Malls are Recovering from the Downturn
Excerpt: "The vacancy rate of U.S. malls in the third quarter declined to 8.2% from 8.3% in the second quarter, according to new statistics released by Reis Inc., a real-estate data firm. Mall vacancy was 8.7% in the third quarter of 2012, said Reis, which tracks the top 77 markets in the U.S.
But the improvement hasn't been as strong with shopping centers—typically open-air retail strips that face parking lots. The average national vacancy rate for neighborhood and community shopping centers held steady in the third quarter at 10.5% from the previous quarter, down from 10.8% in the third quarter of last year.
The national average asking rent at shopping centers was $19.25 per square foot, up just 1.5% from the recession low of $18.97 in 2011. The average asking rent for malls in the largest 77 U.S. markets rose to $39.77 per square foot in the third quarter, up 1.4% from the same quarter last year, according to Reis Inc.
Malls are recovering faster because people go to them for high-end retail, entertainment and dining. People are more likely to go to shopping centers, on the other hand, for basic consumer needs that they can also satisfy online, real-estate economists and executives say.
'If you're more of a middle-income or lower-income household, you'll probably be looking for deals online, and that directly translates into why malls are doing better,' said Victor Calanog, Reis's chief economist.
Both malls and shopping centers were clobbered by the downturn. Mall vacancy rates are now falling partly because there has been little to no new mall development since 2006, Mr. Calanog said.
South Carolina-based Edens, which owns 114 centers, is making up for the contraction and closings of other tenants by focusing on fitness center operators like LA Fitness International and eateries such as Chipotle Mexican Grill Inc. CMG +1.79% and Le Pain Quotidien.
'We basically replaced those type of retailers with things that people can't buy on the Internet, or people aren't comfortable buying on the Internet,' said Terry Brown, Edens's chief executive. Malls, meanwhile, have seen an influx of luxury retailers. Aventura Mall, a 2.5-million-square-foot mall partly owned by Simon Property Group LP, the country's largest mall operator, has done deals recently with Louis Vuitton and Cartier, according to Donald Soffer, whose company co-owns and manages the property."