(Reuters) – U.S. retail vacancies inched higher in the fourth quarter, underscoring how the retail sector has withstood many store closures across the country, real estate research firm Reis Inc said in a report.
Shoppers ascend and descend escalators at the King of Prussia Mall, owned by Simon Property Group, United State’s largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. Picture taken December 8, 2018. REUTERS/Mark Makela
The retail vacancy rate rose to 10.2 percent from 10.0 percent a year earlier, the report said.
Many feared that vacancy rates would soar and rents would plummet, given the store closure announcements by Sears Holdings Corp, Kmart and JC Penney Co Inc (JCP.N) at the end of 2017, Reis said.
“This did not occur as the doomsday prognostications proved to be overblown,” the report said.
A number of stores are still expected to close in the coming months and the industry continues to face a number of headwinds, including gains in online shopping, according to Reis.
“If the retail sector was able to sustain the store closures over the last year, it can survive anything,” the research firm said.
Both the mall sector and the neighborhood and community shopping center sectors have seen significant volatility over the last year. The mall vacancy rate rose to 9.0 percent from 8.3 percent.
Net absorption was 1.4 million sq ft in the quarter, compared with 3.6 million sq ft a year earlier.
The national average asking rents, as well as the effective rent rose 1.6 percent.
Only 1.9 million sq ft of new construction was completed in the quarter, a 51.9 percent drop, according to the report. Vacancy rose in 32 of 77 metros.
With minimal construction in the pipeline, vacancy rates are expected to hold steady in the coming year, the report said.
Reporting by Sanjana Shivdas in Bengaluru; Editing by Maju Samuel
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