According to new data released by the International Council of Shopping Centers (ICSC), U.S. regional shopping center sales per square foot sank by 7.7% in 2009 following a 4.5% drop in 2008.  

What is really impressive about the calamity is the fact that it was so broad-based.  ICSC measures productivity change in 29 tenant subcategories and all except one -- toys/educational/hobby -- experienced declines.  And one suspects that the only reason toys/educational/hobby enjoyed an increase was the fact that bankruptcies and store closures in the category have driven out some of the worst space.

Productivity should now start to rise in U.S. malls as tenants cycle on abject base-year performance.  The big question for many retailers is whether the recovery will be fast enough and strong enough to save a lot of units that are operating right at the margin.  

Data by CoStar on regional center vacancy rates have always looked suspect on the low side (about 5 per cent nationally in 3Q09), particularly considering that both Simon and Westfield have declared higher vacancy rates in their mall portfolios.  And they have some of the better centers. In all likelihood vacancy is closer to twice what CoStar is saying it is, and still rising.  If so, sustainable reuses for the vacant space are going to be difficult to come by even after the economy recovers.  The rate at which regional centers are eliminated from the retail inventory will accelerate rather than decline over the next few years.  Expect the current mall count of about 1,100 to come down to about 650 by 2020.


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