Shopping centers around the country saw an up-tick in revenue in the second quarter but not enough to offset higher expenses, the National Council of Real Estate Investment Fiduciaries (NCREIF) and the International Council of Shopping Centers (ICSC) says in reporting on a new survey.
The survey of investment managers for approximately 1,000 shopping-center properties found that operating income of all shopping centers on a square foot basis rose 4.9 percent from the same quarter last year, while operating expenses rose by a larger 5.8 percent.
Despite expenses outpacing income gains, net operating income (NOI) per square foot actually improved by a solid 4.5 percent in the quarter compared to the second quarter of 2011, the survey found.
“Second-quarter NOI for the shopping-center industry helped increase the total investment return by 3 percent over that same period,” noted Jeffrey R. Havsy, director of research for NCREIF. “Retail was the best performing property type in the second quarter and occupancy rates for all-shopping centers remained steady at 90 percent.”
U.S. shopping‐center performance differs widely by type of sub-sector, according to real estate data collected by NCREIF. Second quarter power-center NOI energized the industry with its 8.6 percent year-over-year gain. Neighborhood-center NOI posted a 6.1 percent gain while super-regional malls gained 5.4 percent compared with the same quarter of the prior year. However, NOI for community centers and regional malls fell in the quarter.
Michael P. Niemira, vice president of research and chief economist for ICSC, observed that surprisingly, “power centers have consistently been a strong performing segment of the industry over the past year and a half. Despite lingering concerns about the big boxes which support the power center format, those centers have clearly been profitable since 2011.”