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Consumer Spending - 7/16/14

One of the driving forces behind the current U.S. economic recovery has been consumer spending.  Consumers have been dishing out money on any number of items, including merchandise sold on the Internet, automobiles and vacations.  They have also been spending at the nation’s malls, which is inducing shopping center owners to increase rents as retailers now in expansion mode jockey for dwindling available space according to the Wall Street Journal. 

Vacancies at the nation’s strip centers declined to 10.3 percent during the second quarter, nearly a percentage point lower than the post-recession high set in the third quarter of 2001.  At the nation’s malls, vacancy is now below 8 percent, down from a high of 9.4 percent set during the third quarter of 2011.  As a result, rents at the nation’s malls increased for a 13th consecutive quarter and for an eleventh consecutive quarter at strip centers. 

Vacancy rates are even lower at the highest quality shopping centers.  One of the reasons for this is a relative dearth of new shopping center construction.  While vacancy and rent dynamics reflect the ongoing recovery, the news is of course not all good.  Rising rents paid by retailers are likely to translate into rising prices for consumers.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.