Conor Flynn
Chief Executive Officer at Kimco Realty
Good morning, and thanks for joining us today. I will begin with an overview of the leasing environment, highlight a few of our notable accomplishments during the quarter and provide an update on our longer-term strategy. Ross will then cover the transaction market and Glenn will close with our financial metrics and updated guidance. Easing inflation and robust labor market have bolstered consumer sentiment. Demand for space remains strong as retailers continue to pursue their expansion plans, resulting in a favorable leasing environment for the Kimco portfolio. We closed the second quarter with 153 new leases, totaling over 650,000 square feet, with strong demand from our high-quality first rank suburban locations and limited new supply, rents are up across all of our regions. Our strong interest spreads continue to validate our portfolio quality and embedded pricing power. Our new leasing spread was 25.3% and included new leases on four of the Bed Bath & Beyond. two of which we recaptured during the quarter. Overall, we closed 485 deals during the quarter, totaling 2.7 million square feet with a combined spread of 9.9%.
Our second quarter renewal and option spread was 7.6%, with renewal ending at 6.5% to options at 9.3%. As a result of healthy consumer spending in desirable locations, the majority of our tenant base, including small shops and anchors, are electing to renew, retain and reinvest in their stores. We ended the quarter with 332 renewals and options totaling 2.1 million square feet, exceeding the previous 5-year average for second quarter renewal and option volume and kept our retention rate in your all-time highs. All businesses grew throughout our portfolio with sequential occupancy gains of 30 basis points to 91%, only 10 basis points shy our all-time high, and we executed 26 anchor leases this quarter. The most substantial anchor activity we have generated in over five years. Overall occupancy for the second quarter finished last at 95.8%. This includes the recapturing of eight Bed Bath & Beyond boxes in the second quarter. These big 8s plus 11 from Tuesday Morning, resulted in an anchor occupancy reduction of only 10 basis point sequentially to 97.7% while still up 10 basis points year-over-year. This leasing activity bodes well for the absorption of our remaining Bed Bath & Beyond boxes and has also widened our spread between the signs but not open retailer pipeline to 300 basis points, another good indicator of future growth embedded in the portfolio.
While we are not immune to retailer bankruptcies, the overall quality and diversity of our tenant mix, high-demand locations and best-in-class leasing team enable us to withstand and in some cases, take advantage of the short-term vicissitudes of tenant failures. In terms of Bed Bath & Beyond, we've released seven locations through the end of second quarter, including the four new leases executed during the second quarter with a pro rata mark-to-market spread of 31%. In addition, three of our leases were purchased by the retailers as part of the Bed Bath & Beyond auction. Currently, we have activity on the 19 remaining Bed Bath spaces with a mark-to-market opportunity of over 20%. While we anticipate a dip in occupancy during the third quarter due to the vacating of the remaining 19 Bed Bath leases at the end of July, we have seven locations at least and activity on the 12 remaining. Overall, we are encouraged by the brisk lease-up of these boxes, which further demonstrates the quality of the portfolio and the strength of the retail market. And ultimately, we believe we'll benefit from backfilling these boxes with stronger credit tenants.
With respect to our long-term strategic goals, we continue to make good progress. First, we added a new Sprouts grocery store to an asset in Virginia, increasing our percentage of grocery-anchored assets in the portfolio to 82%. In addition, our mixed-use portfolio continues to shine. We have now reached 2,471 apartments in operation across the Kimco portfolio with over 1,000 apartments under construction and 5,300 entitled offering a significant pipeline of future densification opportunities. The residential densification both complements and enhances our retail sites, resulting in higher asking rents and leasing activity. A perfect example of this is our Pentagon project in Virginia, a newly completed 253-unit apartment complex, affectionately named the Milton, which is already 49% leased and ahead on rental rate and absorption assumptions. The addition of the Milton will have positive long-term impact on the economics for the rest of the site. In closing, we are pleased with the performance of our operating platform and proud of our team's strong execution that allowed us to quickly and accretively backfill our vacancies have meaningful rental spreads, a true testament to the quality of our portfolio and leasing team.
We have also made significant progress in our ongoing efforts to maintain a strong balance sheet and related metrics. Glenn will provide the details shortly. That said, we continue to challenge ourselves to do better. We are tracking our deal costs and our build-out time from lease execution to rental investment to ultimately enhance efficiency. We continue to focus on growing net effective rent and have reduced the time line for building out space year-over-year for the past two years. In addition, we are proud to be recognized by Forbes as a net zero leader, the only shopping center REIT to make the top 100 list as we strive to be a leader in sustainability. All these accomplishments are reflective of an enormous team effort at Kimco. While we are positioned to withstand headwinds that will inevitably emerge, we are also ready to take advantage of opportunities as they present themselves in our ongoing effort to maximize results for all of our stakeholders. Ross?
