By Matthew K. Harding, CEO
Open-air shopping centers – especially those with grocery anchors – have long been fan-favorites for shoppers, tenants and investors. Propelled by a blend of convenience, accessibility and well-rounded tenant mixes, this asset class exudes resilience and sustained appeal that makes it a sure bet for 2022.
The Advantage of Operational Flexibility
By nature, neighborhood, community and power centers provide a higher level of operational flexibility than other product types. For example, during pandemic-fueled business interruptions, open-air environments enabled tenants to be more creative and accommodate new or expanded uses. This included increasing outdoor space for dining or fitness classes; or expanding fulfillment options by setting up curbside pick-up.
We have seen how quickly shoppers returned to in-person shopping once they could. Ultimately, people like – and want – to shop in person. But they also expect an experience that is safe and efficient. Agile retailers will continue to embrace change with their customers’ wants and needs in mind. And open-air centers are positioned to support them.
The Advantage of Diversity
Open-air centers accommodate tenants of all shapes and sizes; this diversity is part of what lends to an appealing shopping experience for consumers. Leasing activity over the last 12 months illustrates this point. Essential categories are leading the way, highlighted by grocery tenants, national off-price retailers and healthcare providers. Bright spots in the leasing landscape also include fast-casual restaurants, and personal care and services concepts.
National brands and franchisees are making deals. We also are seeing movement among independently owned retailers; this includes new businesses launching, and current operations expanding or moving to improve location.
Within our portfolio, Mayfair Shopping Center in Commack, N.Y., provides a real-time snapshot of this trending. Our team recently completed a 30,000-square-foot lease there with German grocer Lidl. Five additional commitments bring three new dining concepts, a specialty food store and a women’s apparel shop to the property. Additionally, Planet Fitness is gearing up to open a 20,000-square-foot location there.
The Advantage of Adaptability
Transformation is nothing new in the retail real estate industry. As new concepts come online while others reach their end, it is creating an ideal environment for repositioning and reinventing assets. Again, open-air centers are at the forefront.
Take St. Georges Crossing in Woodbridge, N.J., where Levin Management renovated a free-standing outparcel building (formerly occupied by a Bertucci’s restaurant) and leased the space to three new tenants: a Comcast Xfinity retail store, Popeye’s Louisiana Kitchen and Jersey Mike’s subs. This is a great example of not just filling space but repositioning space and filling it with the right tenants – brands that complement an existing tenant mix and add to a property’s dynamic.
Further, many landlords are taking a step back and focusing on what needs to be done to best position their properties for the next chapter. With the continued momentum of “live, work, shop, play” environments, adaptive reuse projects are also becoming part of the conversation.
The Advantage of Investment Appeal
Finally, open-air product also is ripe for investment activity. Grocery-anchored centers, especially, are among the most sought-after real estate categories; these properties are commanding low cap rates driven by low interest rates. Simply put, properties with supermarkets do better than those without, drawing strong and steady traffic that boosts leasing appeal and, subsequently, return on investment.
In general, however, investor affinity for all well-located, well-tenanted open-air shopping centers has endured through decades of market cycles and the continually evolving landscape of retail, itself. This advantage is sure to continue.
