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U.S. malls haven't been this empty since 2012, when the retail industry was clawing its way back after the Great Recession, according to a new report from real estate research firm Reis.
The vacancy rate at regional and super regional malls reached 8.6 percent in the second quarter of 2018, based on a survey by Reis of 77 metropolitan areas across the country. That was up from 8.4 percent in the prior period, and a high not seen since the third quarter of 2012, when the vacancy rate was 8.7 percent.
The news comes as more consumers shop online and Amazon steals market share from traditional retailers. The industry's been struggling to survive, with many companies closing physical stores or reorganizing altogether in bankruptcy. Some haven't made it at all. It's put millions of square feet of store space back on the market this year, much of that within shopping malls.
Department store chain Bon-Ton went bankrupt, shuttering hundreds of stores, while Sears continues to trim its real estate portfolio. Toys R Us, an anchor at many open-air strip centers across the U.S., filed for bankruptcy late last year and just last week closed all of its locations for good.
Retailers were once rewarded for opening as many locations as possible, with square footage almost synonymous with the success of a business. With consumer shopping habits shifting online, brick-and-mortar stores have become expensive and redundant.
According to Reis, the vacancy rate isn't expected to improve in the near future. A report from Credit Suisse has predicted that 25 percent of U.S. malls will close by 2022.
Still, there were some bright spots in the data.
Those U.S. mall owners with top-tier properties or more heavily trafficked malls have maintained power over their tenants, as rents grew about 0.3 percent in the second quarter against a backdrop of heightened vacancies, Reis said.
Real estate investment trusts such as Simon, Macerich, GGP, Taubman and Unibail-Rodamco-Westfield have been filling shuttered storefronts with more restaurants, pop-up shops and experiential and service-oriented tenants such as gyms and walk-in medical clinics.
A cloud hanging over the retail real estate industry has meanwhile prompted a wave of mergers and acquisitions, with many public landlords trading at a heavy discount on the Street. Westfield was recently purchased by European property owner Unibail-Rodamco. Brookfield Property Partners is in the process of buying GGP. And activist investors are targeting Taubman and Macerich.