Shopping Centers Today

NOV 2016

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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10 S C T / N O V E M B E R 2 0 1 6 T H E C O M M O N A R E A REITs In-line stores are the new mall anchors at General Growth Landlords are becoming less and less reliant on department store anchors to draw traf- fic and sales, according to General Growth Properties. In a recent presentation to inves- tors, the company pointed out that its in-line regional shopping center retailers are outper- forming its department stores by attracting Millennials, who tend to spend on retail at higher rates than other generational groups, according to CEO Sandeep Mathrani. In fact, department store performance has lagged that of in-line shops over the past decade within General Growth's portfolio. On a rolling 12-month basis as of June 2016, anchor sales were down by 1.9 per- cent, while total in-line sales were up by 2.8 percent. Between 2005 and 2015, total non- anchor GAFO sales grew by 33 percent on a same-store basis at General Growth malls. Meanwhile, sales-reporting department store anchors saw revenue decline by 10 percent during the period, on a same-store basis. And the trend is hardly isolated to General Growth's malls. Industrywide, GAFO sales ex- cluding department stores grew by 30 percent between 2005 and 2015, while sales at depart- ment stores excluding leased departments declined by 23 percent. In the second quarter of 2016, the tenant categories that performed best at General Growth Properties were restaurants, home furnishings and health and personal care. All these categories are popular with Millen- nial shoppers, who seek experiences more often than they seek things, says Mathrani. "Millennials have the highest propensity of any generation to visit regional shopping centers on a regular basis." S C T TOP REIT ACQUISITION Retail square feet purchased by public U.S. equity REITs during 2015 and year-to-date through Oct. 3. Market (Acquirer) Other retail Regional mall Open-air Total New York City 1.7 million sf 1.9 million sf 8.7 million sf 12 million sf Washington 783,867 1.9 million 924,938 3.6 million Miami 192,050 1.2 million 1.8 million 3.2 million Chicago 306,200 764,229 1.7 million 2.8 million Phoenix 1.6 million 760,865 420,365 2.8 million Dayton, Ohio 3.0 million 3.0 million Columbus, Ohio 355,220 1.9 million 2.2 million Seattle 343,706 1.1 million 841,896 2.2 million Houston 482,138 384,615 956,521 1.8 million Los Angeles 135,745 1.1 million 611,487 1.8 million Source: SNL Financial MALL VACANCIES DECLINED IN 3Q U.S. regional mall vacancies averaged 7.8 percent in the third quarter, down from 7.9 percent in the second quar- ter, according to research firm Reis. Asking and effective rents for shopping centers increased for a third-straight quarter, while the growth rate for rents was flat with the second quar- ter, at 0.4 percent. Meanwhile, the U.S. vacancy rate for neighborhood and community shop- ping centers rose by 10 basis points quarter on quarter, to 10 percent. T E S L A O P E N S U P T O C U S T O M E R S A T ( M A S S . ) M A L L

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