As shopping malls across America struggle to attract customers, fill floor space and ultimately stay open, strip malls are apparently seeing a surge in value and popularity. And it's basically thanks to the COVID-19 pandemic.
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Once seen as eyesores, some strip malls are getting facelifts and filling with new tenants, according to Jessica Vara, with Hunton Andrew Kurth law firm.
"With many Americans working from home at least a few days per week, consumers are craving accessibility, one-stop shopping and easy parking. As a result, strip malls are seeing an increase in foot traffic during weekdays," Vara said in a blog post. "With hybrid work arrangements remaining in place, strip malls may well continue to see strong growth into the coming years."
Traffic to strip malls was up 18% in 2022 compared to pre-pandemic numbers, according to a RetailStat analysis of 2,500 properties.
"Strong national chains such as Starbucks are moving into these strip malls and average rents for strip mall space reached a record high in the third quarter of 2023," said Vara. "With stronger rents and big-name franchises entering as tenants, existing strip malls are seeing strong profits both from an owner standpoint and a tenant/business standpoint."
As more shopping is done online, experts say consumers are now looking for retail that is close to the road and fast to get in and out of. Shoppers who seek out strip malls are hyper-local and loyal customers -- "the regulars."
"With so much traditional merchandise being available online (clothing, housewares, etc.), strip malls tend to attract more service-oriented business such as nail and hair salons, specialty coffee shops and fast casual lunch spots," Vara said. "Consumers are returning their packages, picking up something to eat and getting a quick haircut all on their lunch break within the same small row of shops."
One major retailer testing the strip mall waters is Macy's, which plans to open 30 small-format stores in strip malls over the next two years as it struggles with dwindling mall traffic. The smaller stores are roughly 1/5 the size of the full-line stores and include a "curated and localized selection" of products.
"Our small-format stores are efficient to operate, provide the customer with a shopping alternative within our omnichannel ecosystem and present a unique opportunity to target high-traffic shopping centers," CFO Adrian Mitchell said in a statement.
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