Conor C. Flynn
Chief Executive Officer at Kimco Realty
Good morning, and thanks for joining us today. I'm going to lead off the call with a brief review of the current retail environment, highlight a few of our Q1 accomplishments and provide an update on our overall strategy. Ross will describe the transaction market and the high demand for our open-air and mixed-use products. And as usual, Glenn will cover our financial metrics and provide updated guidance for the year ahead. 2022 is off to a very good start. The integration of the Weingarten merger is now complete, and as anticipated, our scale, geographic clustering and operational platform is stronger than ever.
This success is occurring at the same time that retailers are taking a fresh look at their real estate portfolios and concluding that the physical store has proven to be the linchpin of retail. To put that in perspective, it wasn't long ago, when many people thought that the physical store was on the verge of extinction and that e-commerce was a [Indecipherable] for retail. Now retailers are looking at the physical store through a new lens. A lens that is focused on optimizing the store for retail, e-commerce and distribution.
Tenants are revising their capital spending budgets to address the omnichannel revolution and e-commerce platforms. They are readily investing capital on refurbishment, expansion, fulfillment and last mile distribution. When retailers evaluate their real estate, they no longer separate their warehouse and distribution needs from their sales requirements. Today, leading retailers are taking a holistic approach to determine the best locations to ultimately serve their customers. Indeed, this integrative approach is the dominant recurring theme during our portfolio reviews with retailers and is creating more demand for optimal location.
We are seeing renewal and new deal demand for well-located space that is not only suitable for generating in-store sales, but is also conducive to last mile distribution and fulfillment. Target stores is a bellwether for this newer approach with more than 95% of their total sales, physical and online being fulfilled through their store base. The result is a tremendous halo in value add for their existing and growing store fleet.
This trend of increased capital spending by retailers and the renewed focus on and demand for quality locations is good news for Kimco. Higher retention, lack of new supply, quality real estate and a well coordinated team effort are strengthening pricing power and accelerating the speed of recovery throughout our portfolio. The result is higher cash flow, greater leasing velocity, improved net effective rents and growth in recurring FFO. Our incredible team produced a record 475 renewals, totaling 3.9 million square feet and the renewal and option spreads of 6.4% continue to underscore the supply and demand dynamic I just described. Specifically, new first quarter leasing was strong producing 178 new deals totaling 719,000 square feet, and our pricing power is reflected by a solid new leasing spread of 18.6%. Retention levels remain high, with lack of new supply, putting more value on existing stores and resulting in more remodels and lease extensions with minimal capital required from Kimco.
It is worth noting that positive net absorption in the first quarter historically has been a rarity and yet our superb leasing team generated a 30 basis point increase in our pro-rata occupancy, which now stands at 94.7%. This is our highest first quarter sequential occupancy gain in over 10 years. Year-over-year occupancy is up 120 basis points. Strategically, we continue to focus on enhancing our already strong open-air, grocery-anchored and mixed-use portfolio in our top markets. Ross and his team are constantly analyzing new potential acquisitions as we look for the best fit for our portfolio.
We've also made excellent progress on entitlements. In the first quarter, we entitled 1,300 apartment units in three of our core markets, Denver, Fort Lauderdale and Washington, D.C. Our mixed-use assets are benefiting from the dual recovery in both the apartment and retail sectors. All this activity gives us flexibility and optionality to create FFO growth and shareholder value. While we are proud of our results, we recognize it is not all smooth sailing, the war in Ukraine, the lockdowns in China, the rise in COVID numbers and the re-emergence of mask mandates in certain areas present real challenges. The consumer is being stretched by a record inflationary environment at the gas pump and at the grocery store.
Despite these headwinds, traffic continues to flow to our grocery-anchored neighborhood and necessity-based centers. Traffic in the first quarter of 2022 was 108.9% relative to the same period in 2021 as the value provided by our essential-based retailers remains as important as ever. In closing, I want to thank our entire organization. They respond to every challenge. We're tirelessly maintaining our do the right thing culture.
Their collective drive has enabled us to push our recovery faster than we anticipated and execute our strategy with precision. It feels like we are just getting started, which makes it so exciting to be a part of this great team.
And with that, I'll turn it over to Ross.