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Commercial Real Estate

Mall vacancy rates at a ten year high, stores continue to close

Vacated JC Penny at a Nebraska mall. Photo by Pat Murray.

An Austin example

My favorite destination in Austin is The Domain, a live-work-play outdoor mall with condos, retail and restaurants. It is high end in the first phase featuring a Tiffany’s, a Louis Vuitton, a Neiman Marcus and so on and so forth. The second phase is traditional mall fare with Aeropostale and Subway.

Strolling through The Domain nearby our house, we have become disenchanted. The Borders anchor on the south end is obviously closing. The chic decor store is closed, the yoga clothing store is gone, the glass art store is no more, Martin+Osa went out of business, Joe DiMaggio’s restaurant “closed to focus on other locations,” and the Whole Foods originally slated to open in 2012 was halted at the ground breaking stage two years ago leaving piles of rocky dirt on the road side. But at least the Macy’s isn’t one of the targeted closings, there’s always that.

Mall vacancies hit a 10 year high

Since Reis.com began recording mall vacancy rates in 2000, the rate has dropped to its lowest point yet in the first quarter of this year, sitting at barely over 9%. Retail sales have risen, rents are declining, yet vacancy rates remain high, most likely because of the time lag it takes to negotiate a large national lease.

What now for malls?

Our favorite mall will rebound, we know it will, and we are loyal, but there is a virus on what people perceive to be a dying mall that makes people feel a negative energy as if they’re going somewhere that is undesirable, so they seek alternatives. Residential real estate is impacted when people believe an area is on the decline and closing stores is what people feel is a symptom of an area that is undesirable, so they move elsewhere. It’s a vicious cycle.

Creative rent scenarios will likely pop up, but with rents lowering and vacancy rates rising, landlords will simply have to buckle up for the ride because Border’s isn’t the last company we’ll see this year close its doors.

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Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

14 Comments

14 Comments

  1. MH for Movoto

    April 7, 2011 at 3:14 pm

    it’s depressing to see that happen to a beloved mall. I wholeheartedly agree about macy’s, though – thank heaven for macy’s.

  2. BawldGuy

    April 7, 2011 at 5:11 pm

    One wonders why Whole Foods hasn’t begun making noises about breaking ground. How are other area malls doing there?

    • Lani Rosales

      April 7, 2011 at 7:11 pm

      It’s not Whole Food’s fault, there was a whole taxing debacle over the property and no push to get the project going at a city level. WF is doing really well nationally despite the downturn, my sources say.

      The indoor traditional malls are still doing well, actually recovering, but the live/work/play spaces aren’t doing as well but they are new to Austin as of four years ago, so the city is still figuring them out. Simon malls I would venture a guess are beating the national average (in Austin at least), and most everything here is Simon. But the luxury shopping malls have much higher vacancy (Arboretum & Domain) but I doubt it will stay that way for long.

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