On a dollar-per-square-foot basis, malls with a vacancy rate of 5% or less traded at a 45% premium over those with higher than 5% vacancies from 2010 to present. This is a marked change from conditions in the past, when the premium was a negligible 2%.
San Francisco, CA (PRWEB) October 30, 2012
A report from the Costar Group warns that the future of a great many malls in the U.S. is grim. There is an increasing price gap between strong malls with rising sales and failing malls that are losing their retailers, sales dollars and foot traffic. On a dollar-per-square-foot basis, malls with a vacancy rate of 5% or less traded at a 45% premium over those with higher than 5% vacancies from 2010 to present. This is a marked change from conditions in the past, when the premium was a negligible 2%.
Unwanted mall properties are joining the distressed market, and are being repositioned there. With creative redevelopment and repositioning strategies, these malls are being used for different types of retail, or non-retail uses, such as a university or health care facilities. Mega-churches have taken over former anchor spaces. Others have become call-centers and government offices.
Opportunity buyers, like those at Genesis Capital, see the off market possibilities and continue to look for repositioning possibilities. Genesis sources off market properties from private sellers and banks,displays information on a password-protected Showcase, and houses due diligence on an encrypted due diligence site. With continuing shake-out in most asset types in commercial real estate, opportunity assets for buyers will continue to dominate throughout the year and into 2013.
In a widely quoted report, Green Street Advisors has forecast that 10% of the nation’s 1,000 enclosed malls will fail by 2022, eventually converting to uses other than retail. The litany of issues facing distressed malls and large shopping centers is well documented, states the CoStar report, with ills ranging from changing neighborhoods, increased competition from online sales (no small matter in itself), the appeal of newer lifestyle and power centers, consolidation of anchor stores and sharp downsizing by in-line tenants.
But analysts also see the closings and repositioning as a healthy process. As market forces cull weaker properties, successful malls grow stronger.
About Genesis Capital
Genesis Capital assists commercial real estate investors and buyers with their needs. The company sources off market assets to sell. The assets may or may not be distressed, but they are always off market. Genesis works principal to principal only.