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2014 was a banner year for the U.S. shopping center industry, with surging occupancy rates and strong growth in rents and net operating income (NOI), according to research from ICSC and NCREIF. “Record growth in key indicators such as occupancy and NOI strongly indicate a healthy outlook and further underline the ability of the industry to innovate to fit the needs of today’s consumer,” said ICSC spokesman Jesse Tron.
The occupancy rate for U.S. open-air shopping centers was 92.7 percent at the end of the fourth quarter, the highest level since second-quarter 2008, according to the organizations. Meanwhile, mall occupancy was at 94.2 percent, a level not seen since fourth-quarter 1987.
Base rents at open-air shopping centers rose by 6.5 percent year on year in 2014, the third consecutive annual gain and the strongest level since 2008. At malls, base rents climbed by 17.2 percent last year, the strongest annual gain since ICSC and NCREIF began tracking the data series in 2000, and they increased by 15.3 percent in the fourth quarter year on year, the fifth consecutive quarter with a double-digit gain.
The data show that 2013–2014 NOI at open-air centers and malls alike grew at its strongest annual rate since the beginning of the series in 2000. NOI at malls increased by 17.5 percent year on year in fourth-quarter 2014 — the fifth consecutive quarter with such a double-digit gain — and shot up by 21.3 percent overall last year, to $28.62 per square foot. NOI at open-airshopping centers rose by 8.3 percent last year, to $16.79 per square foot.
In 2014, mall sales productivity reached an annualized $475 per square foot. This indicator has been generally increasing at a healthy pace since 2009, when it was $383.
“The 2014 data paints a very strong picture of the shopping center industry for the year ahead, and is especially promising in the mall segment,” Tron said.
U.S. REITS performed well last year, realizing a total return of 27.15 percent and a dividend yield of 4 percent, according to NAREIT — versus the S&P 500’s 13.69 percent and 1.92 percent, respectively. The 34 listed U.S. retail REITS delivered returns of 27.62 percent last year; regional malls were the strongest retail performers, with a 32.64 percent return, followed by other types of shopping centers, which averaged 29.96 percent. Total returns for regional malls and shopping centers in 2014 were the highest since 2010.
Based on Census Bureau data, the value of shopping center construction, including work done on new and/or existing structures, hit $14.5 billion last year, the highest since 2008. This is up 18.6 percent over the year before and also the fourth consecutive annual double-digit increase.