Report: Spending slump accelerating mall-based vacancies
As the spending slump forces retailers to trim store portfolios, strip malls, community centers and regional markets are all shedding stores at a record pace, according to a report from real estate research firm Reis.
During first quarter 2009, retail tenants at these centers have vacated 8.7 million sq. ft. of commercial space, bumping up the vacancy rate at malls to 9.5%, according to the study.
This statistic overshadows the 8.9% vacancy rate reported for all of 2008, the study reported, and is also the largest single-quarter jump in vacancies since Reis began publishing quarterly figures in 1999.
“These record numbers are symptomatic of the pervasive weakness that we’re seeing across economic sectors,” said Victor Calanog, director of research with Reis. “Their home values and retirement accounts are still reeling, and consumers remain concerned about future income as job losses accelerate.”
Eager to retain tenants, mall operators and landlords have reduced rents by about 1.8% on average in the first quarter, the biggest quarterly drop in rents since 1999. This effort is doing little to entice struggling retailers, Calanog said, adding he expects mall vacancies to exceed historical levels through 2011 before they stabilize sometime in the middle of 2012.
The bleeding has slowed
The market may have reacted favorably last week to news that Target reported a better-than-expected 6.3% decline in March same-store sales, but don’t break out the champagne just yet. The company wisely planned conservatively for March, given discouraging economic conditions and the shifting of Easter sales into April with the late arrival of the holiday. In essence, the company under-promised and over-delivered, to the extent that a same-store sales decline of 6.3% on top of a prior-year same-store sales declined of 4.4% can be regarded as over-delivering.
“Our guests continue to be cautious, but we have begun to see encouraging signs in the operating results of both of our business segments,” said Target chairman, president and CEO Gregg Steinhafel. “In light of the Easter shift and recent trends, we expect our April reported comparable-store sales results to be essentially flat to last year.”
Relative strength was seen in non-discretionary categories such as food, household product, baby and health care, while home and apparel continues to suffer with declining sales. When those categories begin to show some strength and Target reports positive monthly same-store sales a celebration will be in order, but don’t be fooled by April’s results, where the real possibility exists for the company to exceed its guidance given the cautious approach to its sales outlook.
New leadership named at Stop & Shop
QUINCY, Mass. Stop & Shop Supermarket has named Paula Price as CFO and Paula Labian as EVP human resources.
As CFO, Price will be responsible for the Finance, Strategy and Planning, and IT functions at Stop & Shop and Giant Food. Most recently, she served as SVP, Controller and Chief Accounting Officer for CVS/Caremark.
As EVP human resources, Paula Labian will play a key role in positioning Stop & Shop and Giant Food for the future. For the past six years, she served as chief human resources officer (CHRO) and global VP human resources for Whole Foods Market.