The Big Story
Full of Vacancy
Last week, it was reported that mall vacancies have hit their highest level since 2012 and are closing in on all-time records. According to a report by REIS, the commercial real estate data company, the amount of occupied retail real estate in 77 major U.S. metropolitan areas dropped by 3.8 million square feet in the second quarter, the largest decline since 2009.
The news coincided with the last of more than 700 Toys R Us stores closing last week, after the company filed bankruptcy earlier in the year. In all, more than 4,100 major retail stores closed so far in 2018, according to Coresight Research. Six hundred Walgreens have closed this year, while Bon-Ton, Sears and Kmart, Best Buy, Signet Jewelers, Mattress Firm, and GNC have all closed two hundred stores or more this year. Claire’s, Foot Locker, and The Children’s Place have closed one hundred or more locations.
Shopping centers saw 8.6% of their retail space unoccupied in the second quarter, up from 8.4% at the start of the year, according to the REIS report. The vacancy rate peaked at 9.4% in 2011. Back then, the economy was still in a recession, and too many malls had been built in the preceding decades, resulting in a glut of retail space. “We were over-retailed,” said Barbara Denham, a senior economist at REIS. “The recession knocked a lot of stores out of business.“ While the industry made corrections, it may still be the case that the U.S. is over-retailed. The Wall Street Journal recently noted that for every person living in the U.S., there is 24 square feet of retail space. In Australia, it amounts to 11 square feet, and in the U.K., it is just five square feet.