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U.S. malls see decline in vacancies for fifth straight quarter

By Rick Rothacker

(Reuters) - Vacancies declined and rents rose in the fourth quarter at large regional U.S. malls, which continued to fare better than smaller strip centers burdened by a weak economy and an oversupply of space, real estate research firm Reis Inc said.

After modest improvement in vacancies and rents in 2012, the research firm expects the trend to continue in 2013, said Reis senior economist Ryan Severino.

"Until the economy and the labor market start to pick up more, there's not a strong catalyst to generate demand for more retail space."

Employers added a modest 155,000 jobs in December and the unemployment rate held steady at 7.8 percent, the government said on Friday.

In the fourth quarter, vacancies at U.S. regional malls declined for the fifth consecutive quarter to 8.6 percent from 8.7 percent in the third quarter. Asking rents grew by 0.2 percent in the fourth quarter from the third quarter.

Within the sector, class A malls with luxury retailers catering to affluent customers continued to boast lower vacancies and command higher rents than malls with more mainstream tenants, Severino said.

"What's happening is the class A malls are raising the performance of the entire sector," he said.

Vacancies in strip malls declined to 10.7 percent from 10.8 percent in the third quarter. The slight decrease was an improvement from the third quarter when the vacancy rate was flat from the previous quarter.

Still, three-plus years after the recession, the vacancy rate for strip malls is barely below the all-time high of 11.1 percent set in 1990 and the third quarter of 2011, according to Reis.

Asking rents for strip malls increased 0.2 percent from the third quarter. It was the fifth straight quarter that rents increased, according to Reis.

(Reporting By Rick Rothacker in Charlotte, North Carolina. Editing by Andre Grenon)

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