Retailers shuttered more stores in U.S. shopping centers during the second quarter

Retail sales rise most in 4 Years my ass!

Image by Getty Images via @daylife

Mish-
Amidst all the fanfare of purportedly rising retail sales, those digging a little deeper note US shopping center vacancy rates rose in 2nd quarter.

Retailers shuttered more stores in U.S. shopping centers during the second quarter, further delaying a rebound in the struggling retail real estate market, according to research firm Reis Inc.

Shopping centers and strip malls have been pounded harder than other types of real estate, hurt by weak consumer spending, anemic job growth and an oversupply built to serve new housing that never materialized.

"Until we see stabilization and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest," said Victor Calanog, Reis director of research.

For U.S. strip centers, the vacancy rate in the second quarter rose 0.10 percentage point from the first quarter to 10.9 percent, slightly below the 11 percent in 1991 during the prior real estate bust, according to the Reis quarterly report, released on Wednesday.

Retailers gave up 1.85 million square feet of occupied space in the second quarter at neighborhood shopping centers, while developers opened less than 400,000 square feet of new strip mall space.

That compares with an average of about 7 million to 8 million square feet of shopping centers built each year from about 2001, according to Reis.

Retail Mall Vacancies





Mall vacancies have risen for 11 straight quarters and rents have fallen 7 consecutive quarters! Inflation? Hardly.

Same Store Sales - Misleading Sign

Reis has it correct and so do I. Not only is it easy to beat record low comparisons of a year ago, same store sales are rising in part because stores are closing like mad.

Circuit City closed its entire chain in bankruptcy, thus some of those sales went to Best Buy, some other places, and some sales simply vanished.

More importantly, states have been reporting declining sales tax collections for the entire year.

Admittedly state tax collection numbers are frequently delayed by a couple months, but that still does not jibe with overly bullish comments about sales over the first five months of the year from the International Council of Shopping Centers.

Assuming you believe the fantasy sales reports, a more important question is "where to next?"

Where Next Signpost

• Home tax credits are dead along with housing starts.
• New home sales cratered a record 33% in May, to a record low annual rate of 300,000 units. See Inane Thoughts of the Day: CNNMoney Article says "Housing Shortage is Coming" for thoughts and details
• Massive numbers of state layoffs are coming even if Congress throws the states a small bone
• Global growth is slowing led by Europe and Asia (that will affect hiring plans)
• Anemic consumer sentiment numbers took a turn for the worse
• The ECRI's Leading Economic Indicator has fallen like a rock. See ECRI Weekly Leading Indicators at Negative 6.9; How Likely is a Double Dip? More...