Over the last two years, retail malls and properties took a significant hit as stores were closed due to Covid restrictions, and consumers elected to shop from home or their phone rather than venture out into public.
The result of this trend was a significant number of retail bankruptcies in a part of the economy that has been steadily declining for over a decade. Many of the large and small indoor malls and strip centers across the country were facing record vacancies long before 2020, but the pandemic certainly added to the problem.
However, there is a new emerging trend with retail mall space that has CRE investors interested in the potential for the future. As with any type of commercial real estate investing, knowing the type of property and the demographics of the area will be a factor in determining if this is an excellent addition to an investment portfolio.
Class A Malls
Class A malls are those that are in key locations throughout major centers. These are the malls that have the big-name stores and the boutique type shopping experience that makes the mall the place to go for things you need and new shopping experiences.
Investment strategists see the potential for these Class A malls to have a significant uptick in shoppers and traffic over the next few months, providing there is not another wave of the pandemic. People are interested in getting out, meeting friends, seeing new products and fashions in malls where they can enjoy a great meal, shop their favorite stores, and get out in public again.
CBRE predicts that the already established Class A malls, including the super-regional malls, are going to see a surge in customers returning to in-person shopping. Outdoor malls will continue to see the highest increases, with indoor malls trailing close behind.
Other Malls
Class B and Class C malls have less traffic and smaller stores, with fewer anchor tenants that draw in shoppers. While these malls may be closing as retail outlets, they can be a good option for those looking for mixed-use properties.
Smaller malls are being repurposed into apartments, office spaces, shared workspace, and even professional buildings. Combining community services in one location, from Urgent Care Clinics and dental offices to restaurants, boutique shops, and professional services, is another option that is adding to the interest in picking up these properties at a very reasonable price. As with any CRE investment, it is not just the initial cost of the building that needs to be considered. These malls will require considerable renovations, upgrades, and modifications to go from the traditional mall space to the more flexible and innovative spaces as are necessary for multi-use properties.
