Retail Rents Rise as Construction Stays Flat
For the 12th consecutive quarter, rents for stores in shopping centers and malls were on the rise in the first quarter of 2014, a sign that retail landlords may be growing more confident in the economic recovery. But new construction remains slow to catch up with the rise in demand.
Asking rents for space in strip malls ticked up 0.4 percent in the first quarter of 2014 over the previous quarter, reaching $19.42 per square foot. That marks the highest level since late 2008, according to data from Reis Inc. In another six-year high, asking rents for stores in regional malls rose 0.5 percent to $40.15 per square foot.
“Landlords have been able to raise rents in this climate largely because of the dearth of new construction in recent years,” The Wall Street Journal reports.
According to Reis, developers completed about one-fourth the level of construction in the fourth quarter of 2013 compared to the previous quarter, with the addition of just 626,000 square feet of strip shopping centers in the first quarter of 2014. It is the lowest level since the beginning of 2011, Reis reports.
"Construction activity is suddenly back at the nadir we hit in the wake of the recession," Ryan Severino, an economist with Reis, told the Journal. "It speaks to the fragility of the market. In general, there's not a lot being built."