SHLDQ Sears Holdings Corporation (CE)

By Esther Fung 

Despite a wave of retail store closings and mall vacancies across the U.S., the national retail-property market is holding steady.

Vacancy rates in shopping centers increased in 28 of 77 U.S. metro areas in the first quarter from the same period a year earlier, according to data from real estate researcher Reis Inc. That was a slight improvement from the fourth quarter, when 30 metro areas recorded year-over-year increases.

For regional malls, which typically are enclosed retail centers, vacancy rates rose slightly, to 7.9% in the first quarter from 7.8% in the fourth quarter of 2016. Asking rents increased 0.4% in the first quarter, matching the fourth quarter of 2016.

"The overall retail real estate statistics recorded very little change in the quarter," said Barbara Denham, an economist at Reis.

The vacancy rate of neighborhood and open-air shopping centers remained unchanged at 9.9%, the same as the fourth quarter and the first quarter of 2016.

Many retailers and department stores have been battered in recent years by the rise of e-commerce and changing shopping preferences, and have been forced to close stores. Shares of mall real-estate investment trusts have also taken a beating since early 2016.

J.C. Penney Co. recently said it would close 138 stores, while Sears Holdings Corp. in early January said it would close an additional 150 stores. Macy's Inc. said it would shut 63 stores this spring as part of a broader plan announced last August to close 100, or 15%, of its stores.

But tenant demand is likely to soften. "Most retailers are focusing capital investments on the e-commerce rat race, desperately trying to capture market share. This has left physical retail -- the core to most mature retail businesses -- neglected for some time," said D.J. Busch, an analyst at Green Street Advisors, a real-estate research firm.

Mr. Busch added that the struggles faced by department stores likely will continue and anchor store closures could cause headaches even for centers that have strong prospects to fill the empty spaces.

Write to Esther Fung at esther.fung@wsj.com

(END) Dow Jones Newswires

April 04, 2017 11:52 ET (15:52 GMT)

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