"U.S. store closings and cutbacks turned the second quarter into the worst for strip mall owners in 30 years, as budget-conscious consumers flocked to low-cost warehouse-style grocery centers, according to a report by real estate research firm Reis. Strip malls, which are usually anchored by grocery or drug stores, saw average vacancies spike 0.5 percentage points to 8.2 percent, a level unseen since 1995, according to the report released on Monday. Vacancies at regional malls rose 0.4 percentage points to 6.3 percent, the highest level since the first quarter of 2002, according to the preliminary results."This has GGP's name written all over it. If you haven'thad the pleasure, peruse the GGP tome - GGP and the type of investigative analysis you will not get from your brokerage house. GGP is probably the most overvalued and debt laden commercial REIT that I know of.
I have been warning of this occurance since September of last year. GGP is in a vary precarious position, with signficant lease turnover in an ever increasingly soft market, recession looming and pressuring the retail mall front and vendor business models, and most importantly a collapsed credit market (see "Reggie Middleton on the Asset Securitization Crisis" latest installment) at a time when they need to refinance billions of dollars of high LTV debt ASAP.
A growing list of retailers shuttered stores ahead of lease expirations or chose not to renew leases, and as newly completed space hit the market without signed tenants.
Starbucks cnbc_quoteComponent_init_getData("sbux","WSODQ_COMPONENT_SBUX_ID0E4G15839609","WSODQ","true","ID0E4G15839609","off","false"); recently said it would close 600 stores by March. GAP is looking to give up some of the 40 million square feet of retail space its leases. That's in addition to the growing list of retailers, such as Linen 'n Things and Goody's Family Clothing, which filed for bankruptcy protection.
Consumers are constrained by increases in food and energy costs, as well as the cost of servicing debt run up during the housing boom. In addition to cutting back on clothing, jewelry and nonessentials, they have turned to lower-price grocers such as Wal-Mart cnbc_quoteComponent_init_getData("wmt","WSODQ_COMPONENT_WMT_ID0EEJAC15839609","WSODQ","true","ID0EEJAC15839609","off","false"); at the expense of the upper end usually found at strip malls, such as Whole Foods Market Reis said.
WHOLE FOODS MKT INC
22.71 UNCH 0
Preliminary figures show that regional malls were barely able to raise rents, with just an anemic 0.2 percent rise excluding concessions, its weakest gain since the second quarter.