Retail vacancies in the region have dropped to their lowest levels in about five years as shopping centers across Massachusetts filled spaces abandoned during the downturn by troubled merchants, according to several real estate studies.
The occupancy rate at CambridgeSide Galleria, for example, increased to 97 percent from 93 percent a year ago. The mall signed leases with Chipotle and T.J. Maxx, which is taking over the 20,000-square-foot site that Borders left in September 2011 when the national book chain went out of business. Northshore Mall is absorbing 65,000 square feet this month when a DSW shoe outlet and the Container Store move into spaces vacated last year by Filene’s Basement and Bugaboo Creek.
“The market is strengthening which has stabilized rental rates and even improved [them] at the stronger properties,” said Robert Sheehan, vice president of research at KeyPoint Partners, a commercial real estate services firm in Burlington. “The slow pace of new development is also helping to bring down the vacancy rate.”
Massachusetts is outpacing the rest of the country with its retail resurgence. The US retail vacancy rate has been stuck at 6.9 percent since the end of last year, while Boston’s rate dropped to a five-year-low of 4.35 percent, according to most recent reports from CoStar Group , a commercial real estate research firm.
It’s a trend that began several years ago when merchants in the Boston region signed leases for more than half of the roughly 2 million square feet emptied out by the liquidation of chains such as Circuit City, Linens ‘N Things, and CompUSA. Those early successes in filling openings helped soften the blow last year when a second wave of bankruptcies, including Filene’s Basement and Borders, hit the region.
“The improvement is a combination of moderately healthy absorption over the past three years and a slowdown in construction activity – Boston appears to be approaching the bottom of the construction cycle in 2012,” said Ryan McCullough, a real estate economist at CoStar.
While the national retail market vacancy rate remains about 1 percentage point above its 2007 level, there are a handful of markets, including Austin, Texas, and San Francisco, where vacancies have dropped below prerecession levels. These are generally regions, such as Boston, with dense populations and an above-average job creation rate over the past few years, McCullough said.
Data from KeyPoint Partners also indicate the retail vacancy rate in Eastern Massachusetts is at its lowest point since the recession. But many smaller centers are still grappling with persistent holes, according to KeyPoint — it reported that the retail vacancy rate for properties under 250,000 square feet is at 10.4 percent.
Major shopping centers in Eastern Massachusetts over 500,000 square feet are faring much better, with just a 4.9 percent vacancy rate.
Hanover Mall, with roughly 730,000 square feet, reached a 95 percent occupancy rate after last weekend’s opening of Dick’s Sporting Goods, which moved into a large site that Circuit City left behind in March 2009 when the entire electronics chain was liquidated.
Simon Malls, which runs South Shore Plaza in Braintree, Northshore Mall in Peabody, and other retail centers, does not break out vacancy rates for individual properties, but said its entire portfolio had a robust occupancy rate of 94.2 percent, an increase from 93.6 percent from the year before.
After considering the market north of Boston for years, the Container Store, a Texas-based home organization chain, secured a space at Northshore Mall that will open next week. Valerie Richardson, the Container Store’s vice president of real estate, said it has been challenging to find prime sites in established markets in the Northeast, so the company was excited to find a prominent location at a successful mall.
“We had an opportunity to do a location at the entrance of the mall — it’s a great opportunity for us to be a beacon,” Richardson said.
Patriot Place in Foxborough increased its occupancy rate to 95 percent with the opening last month of a Trader Joe’s grocery store, which moved into another Circuit City site.
“We have fielded more inquiries in the last six months than any period since we completed our second phase in 2008, and the Trader Joe’s opening last month has accelerated that interest,” said Patriot Place general manager Brian Earley. “We currently have signed or pending deals for nearly all of our remaining space.”