The Rising Star of Strip Malls in Retail Real Estate

Nov 13

The retail landscape is witnessing a significant shift, with strip malls emerging as key players. A recent article by Kate King highlights this trend, underscoring the changing consumer habits that are propelling strip malls to new heights in the commercial real estate sector. Here's a brief summary:

Spinoff of Strip Malls by SITE Centers: SITE Centers, a major owner of shopping centers, is creating a new company, Curbline Properties, to manage its 61 strip mall properties. This move, valuing Curbline at $1.7 billion, reflects the growing importance of strip malls in the current market.
Pandemic Impact and Changing Habits: The COVID-19 pandemic has reshaped suburban shopping habits, partly due to the rise of hybrid work models. Strip malls have seen an 18% increase in annual visits compared to pre-pandemic levels, driven by more people working from home and altering their daily routines.
Increased Foot Traffic and Lower Vacancy: Unlike traditional shopping centers, strip malls are thriving without large anchor stores. They're attracting a diverse range of tenants, from coffee shops to medical offices, leading to a record-high average asking rent and the lowest vacancy rates on record.
Shift in Investor Interest: Historically perceived as riskier investments, strip malls are now catching the attention of investors. The trend is moving away from big-box-anchored shopping centers, with private investors playing a significant role in strip mall transactions.
Strategic Moves by SITE Centers: In preparation for the spinoff, SITE Centers is restructuring its portfolio, selling anchored shopping centers and acquiring more strip malls. This strategic shift is indicative of the broader trend in the retail real estate sector.

The evolution of strip malls from overlooked assets to prime real estate highlights a fundamental change in consumer behavior and market dynamics. As work habits and lifestyle preferences continue to evolve in the post-pandemic era, strip malls are well-positioned to capitalize on these trends, offering convenience and accessibility that align with modern consumer demands. This shift not only reflects the adaptability of the retail sector but also opens new avenues for investors and businesses alike.

*Read more in WSJ's article titled Strip Malls Are the New King of Retail Real Estate written by Kate King on October 30, 2023.