Open Air Mall Vacancies Hit Lowest Level on Record

Was the threat of an eCommerce-driven retail real estate apocalypse just a mirage?

Vacancies at open-air shopping centers have fallen to historic lows, while new steep building costs and high interest rates have dampened new construction, the Financial Times (FT) reported Thursday (Dec. 26).

Just 6.2% of outdoor shopping centers are available for rent, the report said, citing property data company CoStar. That’s the lowest level since the firm began monitoring vacancies in 2006, and contrasts to indoor mall space, where availability is increasing.

The trend goes against some long-held notions about retail real estate being overbuilt and struggling, said Brandon Isner, head of retail research at Newmark, a commercial real estate group, per the report.

Data from Visa showed that while eCommerce spending growth during the holiday season was poised to surpass that of brick-and-mortar shopping, consumers continued to patronize physical retailers, with 77% of payment volume coming from in-store spending.

Retailers are planning to expand, especially discount stores, the FT reported. Burlington, Ross, and Marshalls/TJ Maxx parent TJX have added a combined 339 stores in the United States this year, while Walmart plans to open 150 locations in the next five years.

At the same time, this year saw Macy’s announce plans to close 150 of its stores as it shifts to smaller footprint locations.

PYMNTS examined the changing mall dynamic earlier this year in an interview with Rachel Williamson, chief strategic retail adviser of Running Great Stores.

“There is definitely more activity and experience-based businesses going into malls,” she said. “It used to be just to fill large open spaces, but now it’s to attract experience-driven consumers.”

While many malls still look like they did decades ago, some are employing innovations to better meet contemporary tastes, Williamson said. For instance, places like Easton Town Center in Columbus, Ohio, and the King of Prussia Mall outside of Philadelphia, are revamping their layouts to place similar retailers together.

“Examples like Chico’s, White House Black Market and Soma all next to each other, or all home stores in the same wing, create a more focused destination,” Williamson said. “This costs money and takes careful planning, but it makes the mall feel refreshed when stores move to make room for new ones.”