Conor Flynn
Kimco's Chief Executive Officer at Kimco Realty
Thanks, Dave, and good morning. I will begin with an overview of the Kimco consumer, provide an update on the favorable supply and demand environment for our business and then share some highlights on our strong operating results, all of which will underscore the resiliency of our high-quality, grocery-anchored and mixed-use portfolio. Ross will also cover the current transaction environment, and Glenn will provide additional financial metrics, report on our balance sheet position and provide our updated outlook.
We continue to navigate an economy that gives off mixed signals. The recent Bloomberg report noted that the American consumer savings have declined with the excess savings cushions that have been built up during the pandemic and used to offset rising prices that are no longer available.
On the other hand, the labor market remains strong, reflecting both job growth and wage growth in the areas of our portfolio is situated. This has led the consumer to remain resilient as they've tempered spending, but not retrenched.
As JPMorgan recently reported, the consumer is now rotating towards staples and seeking value at Walmart, Costco and off-price retailers who are gaining market share. As such, we've benefited from the needs-oriented nature of our portfolio, as over 83% of our annual base rents come from grocery-anchored, open-air shopping centers. It is also why traffic at our properties has increased both sequentially and year-over-year.
This has translated positively to our operating fundamentals as our leasing team is firing on all cylinders. Demand for our well-located product remains strong as tenants seek to retain existing space or add new locations. Our retention levels are near all-time high, with heavy competition for any vacancies, generating increasing rents, better credit and higher valuations. Nationally, store openings are outpacing closing, and the lack of quality retail is having a positive impact on tenant bankruptcy auctions, as leases are being acquired by healthy tenants striving to meet their expansion goals.
In terms of new retail supply, the outlook remains in our favor. It has been well documented that shopping center development, which currently stands at approximately 0.2% of existing inventory, remains exceedingly low. The shopping center sector has been sub-1% since 2010, and has provided the retail sector a meaningful tailwind to drive record low vacancies across the country.
More importantly, we don't see this dynamic changing anytime soon. As we have previously noted, rents would need to increase upwards of 35% to make new development investment worthwhile. This assertion was recently validated by a notable REIT equity research firm, which calculated that the range of rent increases required to stimulate accretive development in the top 50 markets needed to be between 35% to 55%. All of this highlights the strength and unique position of our portfolio.
As I noted, with our focus on grocery-anchored, necessity-based off-price retail, we are able to generate solid results in all kinds of economic weather. This includes uncertainty of national elections and potential policy shifts, predictions of hard or soft landings and the like. Our company, which features a resilient well-located portfolio and strong demographic trade areas, solid balance sheet and best-in-class team, stands out.
To further illustrate this point, now let me touch on a few operating highlights. During the second quarter, we signed 144 new leases, totaling 669,000 square feet of pro rata GLA with rent spreads of 26.3%, our 11th consecutive quarter of double-digit new leasing spreads.
Renewals and options continued their positive trend with 338 renewals and options completed at a spread of 9%. Overall deal volume totaled 2.3 million square feet, with combined rent spreads of 11.7%.
Leasing velocity and retention drove pro rata occupancy higher by 20 basis points sequentially to 96.2%. Pro rata anchor occupancy increased 30 basis points from last quarter to 98.1% and was up 40 basis points year-over-year. Small shop occupancy increased 20 basis points sequentially to 91.7%, matching our all-time high set in Q4 of 2023 and representing an increase of 70 basis points year-over-year.
Of note, we continue to derive meaningful outperformance from the RPT portfolio, which further validates our acquisition thesis. We executed nine new leases in Q2, with comp rent spreads of 146%, driven by a grocery-anchored replacing a furniture store and a strong fitness operator replacing a weaker fitness credit.
We also executed 24 renewals and options during Q2 at a 17% average spread. Year-to-date, we have executed 19 new leases at former RPT sites with spreads of 87% and 46 renewals and options with spreads of 14%. The former RPT portfolio also produced same-site NOI of 4.5% for the quarter and 3.7% year-to-date, meaningfully outperforming our underwriting. We also increased our cost saving synergies to be realized this year as well as additional future revenue opportunities stemming from increasing the RPT small shop portfolio, which currently sits at over 400 basis points below Kimco's. Additional growth in ancillary income will also be generated by our specialty leasing program.
In closing, we are enthused by the performance of our team and our portfolio, resulting in increases to our FFO and same-site NOI outlook. The growth profile of our portfolio continues to trend up, and our team continues to look across the investment spectrum for new growth opportunities, all while remaining vigilant on costs. Ross?
