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Vacancies at open-air shopping centers in the US fell to historic lows, defying predictions of a retail apocalypse due to the rise of ecommerce.

Landlords in complexes anchored by big-box chains, discount merchants and supermarkets have gained the power to raise rents as leases expire. New construction is being held back by higher interest rates and rising construction costs.

Only 6.2 percent of the outside shopping center space is currently available for rent, according to the property data company CoStar, the lowest since it began tracking in 2006. The trend stands in contrast to the closed shopping malls, where vacancies are increasing.

The lack of market is disproving long-held beliefs about retail real estate, said Brandon Isner, head of retail research at Newmark, a commercial property broker.

“They say, ‘selling is overbuilt. Retail is struggling. Ecommerce will take over brick-and-mortar retail.’ And actually none of that ended up being true,” Isner said.

Retailers plan to expand further in the coming years, led by discount chains favored by inflation-weary consumers looking for deals. Off-price clothing and accessories chains Burlington Stores, Ross Stores and TJX, parent of the Marshalls and TJ Maxx store chains, together added 339 stores in the US last year. Walmart aims to add 150 locations in the US over the next five years.

“I would say real estate is tight. There are not many new centers being built. And for us, there is more interest from other retailers and the types of real estate that we generally want,” said Michael Hartshorn, president of the Ross Stores group, to analysts in November.

The clamor for stores comes despite the rapid growth of ecommerce, which allows consumers to shop from home. US e-commerce sales in the third quarter rose 7.5 percent year-on-year to $289bn, outpacing the 2 percent increase in total retail sales, according to the Census Bureau.

But ecommerce sales account for less than a sixth of total US sales. Traditional retailers have discovered that stores are convenient hubs for shipping online orders and processing customer returns. Ecommerce titan Amazon this year added 21 brick-and-mortar Amazon Fresh grocery stores that accommodate in-person and online shopping.

“If you want to serve as many grocery needs as we do, you have to have a mass physical presence,” Amazon chief executive Andy Jassy said earlier this year.

Strong demand for open-air shopping centers, typically storefronts facing car parks, contrasts with the waning fortunes of many enclosed shopping malls. Macy’s plans are a mall bastion close 150 stores.

“The renaissance of our industry is driven by fundamentals and value. It is not driven by Louis Vuitton and Chanel,” said Adam Ifshin, chief executive of DLC, which owns several shopping centers.

Dour forecasts expectations for shopping centers in the years following the global financial crisis as major retailers such as Sears fold. Analysts are talking about a “retail apocalypse”. Lockdowns following the arrival of Covid-19 have increased concerns over the future of personal shopping.

At the same time, fewer new centers were opened. Green Street, a real estate research firm, said builders will add an average of 0.6 percent a year to the stock of strip shopping centers between 2009 and 2023, well below the 2.5 percent of last year. supply added every year between 2001 and the 2008 financial crisis.

“There’s been very little new construction in the last 10 years. That’s probably the biggest driver of economic change and the pricing power of landlords, literally across the country,” said Jeff Edison. , chief executive of Phillips Edison, a New York-listed shopping center owner.

As an alternative to new space, retailers with growth ambitions have moved into buildings vacated by failed rivals such as Bed Bath & Beyond, which had 480 locations when it filed. for bankruptcy in 2023.

Shopping center rents have averaged nearly $18 per square foot this year, according to CoStar, eclipsing highs reached before the financial crisis. Long cheaper than attached shopping mall rents, open-air centers now command an average of $3.52 more per square foot. New leases are being signed at rents up to 32 percent higher than the starting rent of the expired 10-year lease, said JLL, a commercial property broker.

Green Street estimates that rents in the top 50 markets would need to increase by about 65 percent on average for new construction to be profitable. “At current market rents, developments are not penciled in any market,” the company said.