US shopping center, malls stage slow comeback

U.S. retail real estate --largely the malls and shopping centers that were slammed by the recession -- have stabilized, but a recovery is likely to be slow and uneven across the country, real estate experts said.

"Overall, the leasing environment has not only stabilized, it has begun to improve," John Bemis, executive vice president, director of leasing for Jones Lang LaSalle Inc (JLL.N), said.

Bemis spoke on the first day of the International Council of Shopping Center's annual convention in Las Vegas, where real estate owners, their bankers and tenants, met to discuss next year's leasing prospects and beyond.

Attendance also reflected the sluggish retail recovery, with 29,600 registered to attend this year, with about 3,000 to 4,000 expected to sign up at the last minute. Last year, 28,700 people attended, according to ICSC.

During the boom times of 2006 and 2007, attendance met or exceeded 50,000.

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"Malls have performed very well, and I think we're going to see a steady climb," Bemis said. "It's not going to be a steep exit like we saw in 2001."

Retail real estate is driven by consumers who are still wrestling with high unemployment, decreasing home values and rising gasoline prices.

High-end consumers are fueling luxury retailers. Taubman Centers (TCO.N), which operates mostly U.S. luxury malls, saw sales at its 26 malls jump 14.3 percent in the first quarter at stores that have been opened for more than a year.

On the opposite end, outlet centers, whose stores offer lower priced items, have become the sweetheart of the retail real estate sector. They have helped boost results for big mall owners like Simon Property Group (SPG.N), which owns 74 outlet centers internationally, according to Green Street Advisors, an independent real estate investment trust research firm.

But shopping centers with stores that cater to the middle of the spectrum consumer are lagging.

Still, leasing is up about 50 percent over last year, said Anthony Buono, CB Richard Ellis Group Inc (CBG.N) executive managing director, Retail Services.

"The unevenness creates a question around the whole recovery," he said.

Retail mirrors local economies. That means in the markets where economic growth has gained traction, such as New York, Houston, Washington D.C., and Los Angeles and their surrounding areas, shopping centers there are starting to gain power to raise rents.

In Manhattan's Times Square, retail rents now exceed levels reached before the recession, Buono said.