BEACHWOOD, OH-Improved quarter-to-quarter success by Developers Diversified Realty Corp. shows that retail wasn’t as affected by the recent slight dip in overall commercial real estate leasing. The company has reported that the third quarter funds from operations for common shareholders were at $32.7 million, a far cry from a loss of $90.1 million as reported by the firm in Q3 2009.

The company had other good news, including a record 503 total leases signed in the third quarter, for 2.9 million square feet. Same store net operating income growth was at 2% in the quarter, compared to a decrease of 4.1% in Q3 2009. The company ended the third quarter with 590 retail properties in 41 states, Brazil, Canada and Puerto Rico, totaling 134 million square feet.

“We remain committed to our disciplined strategy of simplifying the business and reducing risk for our shareholders,” said Dan Hurwitz, president and CEO, during a quarterly conference call Wednesday. “We expect continued positive momentum in leasing volume and as a result, we will exceed expectations with an anticipated year-end lease rate of 92.2%.”

The company completed 191 new leases for one million square feet and 312 renewals for 1.9 million square feet in the quarter, said Paul Freddo, senior EVP of leasing and development for the company, during the call. “For the second consecutive quarter, we achieved positive leasing spreads for both new leases and renewals,” Freddo said.

The improvements vary depending on market and property type, he said, “but in general we are seeing the most improvement in the junior anchor category. As supply continues to be absorbed and with limited space coming online, retailers, especially in the anchor and junior anchor categories, are feeling the pressure to secure the space necessary to meet store opening plans for 2011 and especially for 2012.” Freddo said the firm expects this pressure to secure future locations to continue, which will assist in the reestablishment of rental growth.

Big box leases, including in those vacated by bankrupt retailers, continue to grow, he said. The company signed 14 new leases for almost 400,000 square feet, and DDR is almost 75% through leasing up the vacated sites, though 21% of those leases are still in the LOI negotiation stage. Freddo said. Also, 25 former Mervyn’s sites owned by DDR were placed with a court-appointed receiver in August.

Surprisingly, he said temporary Halloween and Christmas retail locations are expected to generate an additional $3 million in revenue “on space that would have otherwise been vacant,” Freddo said. As for projected holiday season spending, he said that retailers are cautiously optimistic. “They’re seeing a gradual improvement in sales despite an unemployment rate that remains stubbornly high. Retailers are clearly on much better footing this holiday season, but they will need to continue to execute on the improvements they have made over the past two years to inventory control, product mix and pricing to achieve their planned sales and margin levels,” Freddo said.