The Lowly Strip Mall Is Becoming Retail Hot Property As Name Brand Stores Go Out Of Business
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The retail apocalypse may have blown away some box chain giants like Borders, Circuit City, and Modells. However, in towns and cities across the U.S., the humble strip mall, filled with mom-and-pop-run businesses, is doing a roaring trade. Now, big-money investors are catching on.
According to the Wall Street Journal, the demise of large indoor malls in favor of e-commerce and warehouses has left a gap in the market for physical retail, which open-air outdoor malls have filled, resulting in high demand and low vacancies. Wall Street has paid attention. In November, investment juggernaut Blackstone spent $4 billion on shopping center owner Retail Opportunity Investments – which owns 90 shopping centers – its largest retail investment since 2011.
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Data from real-estate research firm Green Street reveals that open-air shopping complexes work best when the anchor tenant is a grocery store – footfall in supermarkets has increased 12% from 2019-2024 – surrounded by in-person experiential businesses like coffee shops, nail salons, and medical centers, which are impossible to replicate online. Remote and hybrid work means that many of these businesses are not solely reliant on weekend custom.
Following Blackstone’s lead, CBRE expects $10 billion worth of U.S. open-air retail portfolios to change hands in 2025. Blackstone president John Gray said at a Goldman Sachs-hosted event:
“If you were an investor in real estate after the financial crisis, you would have made a lot of money. And my guess is, if you are an investor today, the same thing will happen.”
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In a September blog post, James Corl, head of New York-based private real estate group Cohen and Steers, concurred that the open-air shopping center investment opportunity was a “retail renaissance.” Cohen and Steers recently spent $127 million to buy a fully leased outdoor shopping center in San Mateo, California.
“We see the landscape ahead of us as quite attractive,” Corl said in a blog post. “The recovery in the metrics on the ground do not lie. Landlords are recognizing and using their newfound leverage. Open-air shopping centers are the only major property type that is experiencing an acceleration in rental rate growth.”
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