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CRE Finance World, Winter 2012

CRE Fundamentals and Slow Economic Growth Figure 5 Figure 6 Retail Net Absorption and Vacancy Neighborhood and Community Shopping Center Effective Rent Growth Source: Reis, Inc. Larger property types such as regional malls have not been spared Source: Reis, Inc. from the distress. Vacancies for regional malls increased to 9.4% in the third quarter, marking the third consecutive quarter of vacancy Effective rent growth has been all but nonexistent for neighbor- increases. Although regional malls showed some signs of a recovery hood and community shopping centers, reflecting the severe lack in the latter half of 2010, as soon as the economy began to show of pricing power on the part of landlords. Both asking and effec- the first glimmers of weakness in early 2011, this segment of the tive rents have been deteriorating since mid-2008. Any change in retail sector began backsliding. Asking rents increased slightly during effective rents have been keeping pace with asking rents over the the third quarter, but rents remain down near levels last observed last five quarters, suggesting that concession packages have not in the second quarter of 2006 before the recession struck. budged much. With concession packages failing to spur demand for retail space, landlords have little- to-no incentive to continue increasing them. A publication of Winter issue 2012 sponsored by CRE Finance World Winter 2012 27


CRE Finance World, Winter 2012
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