by Calculated Risk on 10/05/2022 03:44:00 PM
From Moody’s Analytics Senior Economist Lu Chen: Office continues its bumpy ride, and Retail remains flat
This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).
For Neighborhood and Community malls (strip malls), the vacancy rate was 10.3% in Q3, unchanged from 10.3% in Q2, and down from 10.4% in Q3 2021. For strip malls, the vacancy rate peaked during the pandemic at 10.6% in both Q1 and Q2 2021.
This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the ’80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.
In the mid-’00s, mall investment picked up as mall builders followed the “roof tops” of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.
In the last several years, even prior to the pandemic, the regional mall vacancy rates increased significantly from an already elevated level.