In today’s one-click, free overnight delivery world of retail, this news may come as a bit of a shock: Shopping centers are back. As the pandemic becomes part of daily life, shoppers are returning in person to stores, helping to stabilize the retail market after a spate of closures and big-name bankruptcies over the past few years.
Retail rents in the U.S. have maintained their upward trajectory fueled by ongoing solid demand from shoppers. Interest for high-quality space in mature retail markets is being supported by continued easing of Covid restrictions, rebounding tourism and Americans’ build-up of savings.
In Chicago, to note one prime example, vacant anchor retail space dropped 16%, prompting landlords to secure more space as fewer stores exit. Case in point: A shopping center situated near the Obama Presidential Center site on the city’s South Side boasts a 98% occupancy rate and just hit the market for $12.8 million.
Meanwhile, in Los Angeles, Plaza Mexico, a shopping center about 15 miles outside of the city, hums year-round with activity, offering visitors an authentic taste of the country, with vendors selling food, clothing, jewelry and arts and crafts from colorful stalls, plus a popular carousel for the kids. The purchase of Plaza Mexico was one of the largest U.S. retail deals last quarter, which was snatched up for nearly $165 million in a bankruptcy auction.
In Real Life
As we continue to emerge from the pandemic, people are craving experiences that they can’t get on the internet. Shopping centers that present a wide variety of attractions in one convenient location — think compelling in-person shopping concepts, grocery stores, restaurants, fitness centers, salons, medical facilities, and even churches — that simply can’t be replicated online. These creative mixed-use and adaptive reuse spaces go beyond the traditional idea of the shopping mall and should be considered true diversified commercial real estate assets in the mind of the investor.
Strip malls with a grocery store as their anchor demonstrate the durability of this trend — smaller stores that fill in around the anchor benefit from the stability of having a grocery/pharmacy as a need-to-have neighbor while typically paying more per square foot than big-box stores. That equals an equation that can highly profitable for CRE investors.
Healthy Returns
Another current show of strength for shopping centers? Our collective return to the gym, which is boosting occupancy rates at many malls across the country. Since this February, monthly visits to gyms have been, on average, about 13% higher than 2019 levels, according to retail-analytics firm Creditntell, which analyzes location and financial data. Research by global health and fitness association IHRSA also found the number of paid gym memberships in the U.S. had increased 3.8% since the beginning of 2020.
Fitness centers are also shown to increase foot traffic at neighboring retailers, to the tune of 2.5% more visits per month compared with the same businesses’ other locations without the presence of a nearby gym.
Shop Around
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