Shopping Center Vacancies Rises

New York, NY, April 11, 2007--The vacancy rate at local shopping centers rose to the highest level since 2004, in a sign retailers may expect a slowdown in consumer spending, according to a real estate research report.

The first-quarter vacancy rate for strip malls and local shopping centers anchored by grocery or drug stores rose 0.10 percentage points to 7.2 percent, research firm Reis Inc. said in a report released on Wednesday.

"Consumer spending has remained strong, but there is some expectation that the pace of consumer spending growth will slow in the coming quarters," said Sam Chandan, Reis chief economist.

Kimco Realty Corp. (KIM.N) and Equity One Inc. (EQY.N) are two publicly traded owners and developers of grocery-anchored shopping centers.

It was the third straight quarter that vacancy rose 0.10 percentage points, Reis said.

Rent rose 0.9 percent in the first quarter. Yet, in spite of the increases, landlords were unable to reduce concessions -- rent breaks, or work done -- offered to new tenants. In fact, concession levels have been flat or increasing since the second quarter 2004, Reis said.

On the supply side, 5.5 million square feet of new space was completed in the quarter, the lowest level since the first quarter 2004, Reis said. The rise in the vacancy rate, in spite of modest completions, reflects weaker demand for retail space, the report said.

Retailers leased 4.5 million square feet more than they relinquished, just slightly ahead of the fourth quarter 2006, the lowest level of absorption of space since the first quarter 2004.

"The lower net absorption number may be an indication of retailers' outlook for consumer spending growth," Chandan said. "We just haven't seen it happen yet."