At the malls, things are looking up. At least at the high-performing malls.
While national mall vacancy rates are higher than they’ve been in years, local malls are reporting increased leasing activity as retailers take advantage of the recession to move from strip centers into malls and to move to more desirable locations within their centers
But experts said there also is a growing disconnect between the better-performing malls and the worse ones. The best properties attract tenants that are new to the market, while regional malls that have struggled continue to have more difficulty filling empty spaces.
“It’s a long, tough slog out of a pretty deep abyss,” said Craig Johnson, president of retail research firm Customer Growth Partners. “Although things are better, it’s still not four or five years ago.”
The improvements began in 2010, Johnson said, but the recovery has been uneven. It depends on geography, mall operator and the quality of a mall.
According to real estate services firm CoStar Group, metro Atlanta’s mall vacancy rate — a figure that includes lifestyle centers — was 5.7 percent in the first quarter of 2011, down from 6.1 percent at the end of 2010. It was 7.8 percent at the end of 2009. Nationally, mall vacancies were at 9.1 percent in the first quarter of 2011, according to commercial real estate analysis firm Reis, up from 8.7 percent at the end of 2010.
Perimeter Mall has added 24 new tenants since 2008 and relocated 10 tenants within the mall, general manager Dennis Kemp said. He said while leasing has been consistent, Perimeter recognized the challenges facing retailers by offering to start leases at a lower base rate during the recession.
“As vacancies became available, we recognized that perhaps we needed to model our business a little differently,” he said. Perimeter lost seven tenants to bankruptcy.
Suwanee resident Nadija Dzikowski said she and her husband go to Perimeter Mall once a week. She has noticed the new stores that are coming in and said they are a good sign, both for the mall and the economy.
“They’re welcome and wonderful,” she said. “Anything new that comes in, it’s fabulous.”
Recently, Simon Malls has seen more robust leasing activity, Town Center at Cobb marketing and business development manager Shelley Weidner said. Mall of Georgia and Gwinnett Place, other Simon malls in metro Atlanta, have added national and local stores. Between them, Lenox Square and Phipps Plaza they have added 25 new retailers in the past year and announced two more openings.
Phipps mall manager Dewayne Herbert said every indication shows the momentum will continue, as his mall adds a Legoland Discovery Center and 11 Lenox stores have remodeled.
Herbert said because they often house retailers that are exclusive to the market, the area’s top malls didn’t see the impact that some more regional ones have through the recession. Devony Jackson, the leasing associate for Stonecrest Mall, said those malls are often in a better position than malls like hers.
“The best malls in the country are still going to be able to write their own tickets,” she said.
Because of onerous tenancy requirements, Jackson said it is in her best interest to keep the mall’s vacancy rate low. Through the recession, she did that by signing more short-term leases, she said.
Jackson said there is still a market for regional malls, but that tenants are driving a harder bargain for space and lease terms. Those that would pay 10 to 12 percent of their sales in rent before are now asking to pay 6 to 8 percent.
Johnson said as occupancy rates rise, there is less incentive for property owners to give concessions.
Rental rates have started to stabilize as more national retailers have looked toward expansion, said John Bemis, executive vice president of leasing for Jones Lang LaSalle. But he said while dollar stores did well and luxury shoppers are coming back, it was those in the middle that were squeezed.
He expects mall rents to increase as shoppers become more willing to spend.
“Absolutely, we’ve started the climb out,” he said.
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