U.S. Shopping-Center Industry’s Fourth-Quarter Net Income Rises 4.3%

NEW YORK--(BUSINESS WIRE)--The National Council of Real Estate Investment Fiduciaries (NCREIF) and the International Council of Shopping Centers (ICSC) reported that the U.S. shopping-center industry’s net operating income for the fourth quarter continued to show a strong gain nationally. During the fourth quarter, total operating income of all U.S. shopping centers on a square foot basis rose 3.6% from the same quarter of the prior year, while operating expenses rose by a lesser 2.4%. As a result, net operating income (NOI) per square foot posted a strong 4.3% gain from the fourth quarter of the previous year, which followed a very strong 6.3% year-over-year gain in the third quarter. These shopping-center performance data are based on NCREIF’s proprietary database of U.S. property operating information collected from investment managers for approximately 1,000 shopping-center properties.

“ICSC anticipates that the industry will continue to see improvement in its NOI in 2013 as ICSC forecasts a stronger pace of shopping-center sales for the year than in 2012.”

For 2012, the U.S. shopping-center industry posted a 3.6% rise in NOI with improving income (+2.3%), but well contained expenses, which were off 0.1% following a 3.7% reduction in 2011.

Jeffrey R. Havsy, director of research, NCREIF, noted that “Retail was the best performing property type in the NCREIF index for the fourth quarter, and the year. The strong returns were driven by improved fundamentals. Both NOI and occupancy improved from 2011 levels.”


Table 1 U.S. Shopping-Center Industry Performance U.S. Dollars Per Square Foot (SF), Unless Otherwise Noted

ALL SHOPPING CENTERS –	ANNUAL			QUARTERLY
NATIONAL
INCOME AND EXPENSES ($/SF)	2010	2011	2012	2012-03	2012-04
Total Operating Income	$24.68	$23.81	$24.36	$6.06	$6.26
% Change from Prior Year	+2.9	-3.5	+2.3	+3.9	+3.6
Total Operating Expenses	$8.44	$8.13	$8.12	$2.00	$2.10
% Change from Prior Year	+5.5	-3.7	-0.1	-0.5	+2.4
Net Operating Income	$16.24	$15.68	$16.24	$4.06	$4.16
% Change from Prior Year	+1.6	-3.4	+3.6	+6.3	+4.3
ADDENDUM
Occupancy Rate (%, End of Period)	89	90	90	90	91
Source: National Council of Real Estate Investment Fiduciaries

Regionally, fourth-quarter NOI for the U.S. shopping-center industry was the strongest in the east with an 8.6% year-over-year gain followed by the west, which saw its NOI up by 4.4%. The NOI for shopping centers in the south increased by a moderate 1.7% during the fourth quarter, while NOI for the Midwest centers posted a 1.8% decline relative to the same quarter of 2011.

Table 2 U.S. Shopping-Center Industry Performance By Region U.S. Dollars Per Square Foot (SF), Unless Otherwise Noted
ALL SHOPPING CENTERS - REGIONS	ANNUAL			QUARTERLY
NET OPERATING INCOME ($/SF)	2010	2011	2012	2012-03	2012-04
East	$19.99	$17.41	$18.81	$4.70	$4.91
% Change from Prior Year	-0.6	-12.9	+8.0	+12.4	+8.6
Midwest	$12.92	$13.21	$13.18	$3.41	$3.21
% Change from Prior Year	-2.9	+2.2	-0.2	-0.9	-1.8
South	$13.60	$13.71	$14.03	$3.50	$3.61
% Change from Prior Year	+3.5	+0.8	+2.3	+2.6	+1.7
West	$17.71	$17.93	$18.62	$4.59	$4.72

% Change from Prior Year	+1.8	+1.3	+3.8	+9.0	+4.4
Source: National Council of Real Estate Investment Fiduciaries

U.S. shopping-center performance differed by type of sector, according to real estate data collected by NCREIF, but all segments posted a gain in the final quarter of 2012. During the fourth quarter, power-center NOI again surged ahead with a hefty 7.7% rise from the prior year’s fourth quarter. The growth of NOI for super-regional malls rose 4.6% in the fourth quarter with neighborhood and convenience close behind with an identical gain of 3.8% for each sector. The regional mall segment posted a small 0.4% year-over-year gain in its NOI during the year-end quarter.

ICSC Vice President for Research and Chief Economist Michael P. Niemira observed that “The U.S. shopping-center, as a whole, performed well in 2012, but regional malls and community centers were sector laggards.” Niemira further observed, “ICSC anticipates that the industry will continue to see improvement in its NOI in 2013 as ICSC forecasts a stronger pace of shopping-center sales for the year than in 2012.”

Table 3 U.S. Shopping-Center Industry Performance By Center Type U.S. Dollars Per Square Foot (SF), Unless Otherwise Noted
SELECTED SHOPPING CENTERS	ANNUAL			QUARTERLY
SEGMENTS – NATIONAL
NET OPERATING INCOME ($/SF)	2010	2011	2012	2012-03	2012-04
Neighborhood Centers	$12.80	$13.15	$14.20	$3.63	$3.52
% Change from Prior Year	-0.7	+2.7	+8.0	+12.7	+3.8
Community Centers	$14.02	$12.21	$12.27	$3.09	$3.04
% Change from Prior Year	-2.4	-12.9	+0.5	+2.7	+3.8
Power Centers	$10.44	$10.85	$11.84	$3.04	$3.06
% Change from Prior Year	+0.5	+3.9	+9.1	+14.7	+7.7
Regional Malls	$21.33	$20.49	$19.87	$4.76	$5.23
% Change from Prior Year	-3.7	-3.9	-3.0	-4.8	+0.4
Super-Regional Malls	$21.55	$21.88	$22.40	$5.60	$5.88
% Change from Prior Year	+9.1	+1.5	+2.4	+3.3	+4.6
Source: National Council of Real Estate Investment Fiduciaries

About the NCREIF Property Data: The NCREIF property data is collected on a quarterly basis from member firms. The data is collected directly from member’s accounting systems to increase accuracy of the data. A selection of these data for the shopping-center industry will be included in ICSC’s eData statistical database.

About NCREIF

The National Council of Real Estate Investment Fiduciaries (NCREIF) is an association of professionals with significant involvement and interest in pension fund real estate investments who come together to address vital industry issues and to promote research on the asset class. NCREIF was established to serve the institutional real estate investment community as a non-partisan collector, processor, validator and disseminator of real estate performance information. NCREIF produces several quarterly indices that show real estate performance returns using data submitted to us by our Data Contributing Members. For more information, visit www.ncreif.org.

About ICSC

Founded in 1957, ICSC is the premier global trade association of the shopping-center industry. Its more than 58,000 members in over 90 countries include shopping-center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping-center councils throughout the world. For more information, visit www.icsc.org.