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Are Open-Air Centers Still the Place To Be?
Open-air centers — also known as strip malls and strip centers — have seen the biggest rebound in foot traffic among retail channels since the pandemic hit four years ago, according to new research from Placer.ai.
Foot traffic was found to be only down 1% at open-air shopping centers in 2023 compared to pre-pandemic 2019 levels. That compares to a decline of 2.3% across U.S. shopping centers, with visits declining 5.8% at indoor malls and 8.5% at outlet malls.
Open-air centers were already outperforming before the pandemic as consumers favored the convenience of shopping closer to home and one-stop shopping with tenants like grocers, drugstores, and big box retailers like Walmart, Costco, and Target. The centers also have room to house many of the popular off-pricers and niche discounters, ranging from T.J.Maxx to Five Below and Ulta.
Consumers are also seeking out greater variety and experiences not possible in a traditional enclosed mall anchored by department stores. A study from real estate firm DLC Management that came out last year stated, “Lifestyles have changed and people are looking for greater convenience and options in a neighborhood shopping center. This attracts a greater mix of retailers and services to a center. Gyms, new restaurant types where people can work, meet and eat, and medical services. It’s about becoming a destination, which is more experiential.”
Accessible parking is another advantage to strip centers, according to CBRE research. Shoppers are able to get in and out of stores quickly, and they don’t need to spend time navigating large parking garages or walking across the mall.
Among newer trends, work-from-home is driving traffic in the suburban areas supported by strip malls, while downtown traffic remains challenged. Chris Ressa, DLC’s COO, said in the report, “The shift to working from home — even if it’s just 1-2 days a week — means a shopper could be around twice as often as before and our tenants are seeing an increase in traffic.”
Beyond the healthier traffic, retail tenants benefit from increased visibility in strip centers versus enclosed malls as well as lower operating costs, including having no common areas requiring upkeep.
Strip malls are also seen packing omnichannel benefits, according to DLC. Curbside pickup and in-store fulfillment of online orders are easier to pull off at open-air centers than at indoor malls.
A recent Wall Street Journal article detailed how Bath & Body Works, Foot Locker, and Signet Jewelers were among a number of national chains shifting openings to outdoor, non-mall locations after finding that they perform better and are typically more cost-efficient.
Related investments are on the rise. Kimco Realty, North America’s largest public owner of grocery-anchored shopping centers, closed on its acquisition of RPT Realty in January, which has 56 open-air shopping centers. On April 3, Bain Capital Real Estate formed a partnership with 11North Partners to acquire and operate outdoor shopping centers across North America.
11North founder Brian Harper said, “We believe historically low supply growth and increased demand for open-air shopping centers, driven by strong retail sales, persistent work-from-home trends, and the increased prevalence for omnichannel shopping, provide a favorable backdrop for the sector.”
Discussion Questions
Do you see multiple tailwinds supporting the continued outperformance of open-air centers well into the future?
What potential factors may eventually weigh against the off-mall expansion momentum?
Poll
Loading …BrainTrust
Perry Kramer
Managing Partner, Retail Consulting Partners
Warren Shoulberg
There’s no question that open-air centers are doing well, and that’s attracting retailers. Retailers want to be where the traffic is. As noted, open-air centers do offer many advantages over traditional malls and other centers, and so this should spur more development in these types of centers. But these locations will also come with a higher price, as I am certain the high demand will bring premium rental rates. One of the major factors, if not the most obvious, to even broader expansion of open-air centers is climate. Open-air centers have limited opportunities in cold climate geographies and as a result, expansion of these centers will remain concentrated in the geographies where they are able to operate year round.
Top 3 criteria for real estate: location, location, location. This is still true, but for outdoor shopping centers, the aspect of “lifestyle” is also critical. Malls aren’t dead, and an open-air shopping center isn’t guaranteed success, there are many factors that will make either more or less popular. As noted in the article, the addition of restaurants, meeting places, gyms, etc., all combine with retail to make a good location better. The ability to including shading for summer and warmer locations, and even heaters in colder climates, will make shoppers more comfortable.
While I won’t question Tom’s numbers, I find the presentation confusing: presumably the number for “shopping centers” is an average of the three categories – open-air, indoor, outlet – since it seems to lie in the middle of the numbers presented (and logically, what else could be left?). Anyway, whatever the semantics, I don’t find the differences to be either surprising or particularly useful, since there’s usually a different mix of store types at each: strip malls are convenience and neighborhood-oriented, indoor is a destination and outlet malls are…well, for outlets. Which is to say, for a retailer asking “where should I locate?” , the type of store they operate will dictate where they go, rather than some illusion that one type of center is better than others. Yes, it’s a little more complicated than that: Kohl’s long did well – and macy*s hopes to do well – by locating smaller stores in more more locally-oriented centers, but there are still limits…it makes little sense for a major retailer to locate on some random street corner, with limited access and even worse visibility, just because the strip mall there (head shop, tattoo parlor and check-cashing store) sees a lot of foot traffic.
I think we need to define open air centers better. Are we talking about strip malls, outdoor lifestyle shopping malls, or outlet centers which are also mostly outdoors? Maybe not the latter as it seems to be noted separately. However, all three are actually performing well but for different reasons. Strip malls are more focused on essentials and everyday needs, where there has been less of a volume and footfall erosion for obvious reasons. Outdoor lifestyle centers have a strong mix of leisure and unique retail brands, which makes them attractive and interesting. And outlet malls cater to the value seeking consumer – and despite the foot traffic decline noted above, sales haven’t gone down by anywhere near that amount and sales productivity at retailers is actually up.
Agree – much of what the article described as positive attributes sound an awful lot like a traditional small-town downtown. Senior housing, government service centers and libraries, banking, transit hubs, schools, houses of worship, local (not chain) bars and restaurants and bakeries, boutique hotels – it’s back to the future all over again. If we hadn’t over-done it in the 1970s and 80s, a lot less investment would’ve been lost.
Yes, exactly!
The American consumer is fickle. Indoor malls were all the rage in the 80’s now we are writing various obituaries for them. Outdoor centers are now the place to shop, at least in areas where the weather is supportive. Future success depends on design, architecture, parking, and, probably most importantly, the merchants doing business there. That is a lot of success dependent variables, and not an exhaustive list. For about five or six more years I would not bet against outdoor centers, but after that? Who knows.
As the discussion notes, DLC Management, which came out last year, stated, “Lifestyles have changed, and people are looking for greater convenience and options in a neighborhood shopping center.” It is always a matter of lifestyle. Retailers don’t need to come up with silver bullet solutions. They need to understand lifestyle. Today’s lifestyle is all about convenience and time. Why drive 20 minutes to a major mall when you can drive five minutes to a local strip mall and fill the balance of your needs online?
The stats tell the story. When 1% down is considered good, the message is clear. What retailers (and real estate investors) should understand is that these numbers aren’t turning around. Even with the expansion of open-air malls, volume will continue to decrease, and new revenues will take away from the other mall’s revenues.
Lifestyle, no matter how one measures it, is an inertial trend. Retailers must not look at what is happening today but where these trends will lead in 2030.
I remember discussing these not too long ago and we called them lifestyle centers.
I believe that economic conditions are hurting this format as well. You are correct- what are the trends going forward? Smaller centers? Have more of what is important to the customers? I think the election will have a big impact of the direction of these centers. Time will tell.
It’s clear that open-air centers, or strip malls, are not just having a moment; they’re reshaping the retail landscape. With a resurgence in foot traffic, almost back to pre-pandemic levels, underscores a significant consumer shift towards convenience, variety, and experiences that traditional malls struggle to match.
The success of open-air centers hinges on several key factors. Firstly, their tenant mix, including essential services, discounters, and experiential spaces, caters directly to contemporary consumer desires. The ease of access and parking simplifies the shopping experience, making these centers more attractive for quick visits or leisurely browsing. The work-from-home trend further bolsters suburban strip malls, transforming them into local hubs for those spending more time in their neighborhoods.
Retailers recognize these advantages, evident from the moves by major chains like Bath & Body Works (1700+ US locations) and Foot Locker (about 800 US locations) towards outdoor, non-mall locations. This shift not only offers better performance and cost efficiency but also aligns with evolving consumer shopping habits. The sector’s growth is backed by significant investments, signaling confidence in the continued appeal of open-air centers.
However, this is not a slam-dunk story. The very trends fueling the rise of strip malls could shift, particularly if there’s a significant change in work-from-home policies or consumer preferences. Additionally, the sustainability of low operating costs and the ability to maintain a diverse tenant mix in the face of economic fluctuations will be crucial for ongoing success.
Open-air centers are currently riding high on multiple tailwinds, their future dominance isn’t guaranteed. Adapting to changes in consumer behavior, economic conditions, and urban development will be key to maintaining their market lead.
We are all busy and a traditional mall takes time. As the article points out, garages at these malls are very large and adds to the stress and time needed. When you can run into a specific retailer for a particular item, it makes more sense. Plus, many of the strip malls today are much nicer and more upscale than they used to be, especially in areas where the communities are relatively new.
Crime in the garages at traditional mall are also driving consumers elsewhere. Nicer and safer are key words in which shoppers will go.
Location, Location, Location. is still one of the cornerstones of Retail. Open air centers will continue to out perform most of the traditional Malls. There are still a significant number of very successful malls. However the overall number of Malls will continue to shrink and the Open air centers will continue to win traffic. much of this is driven by the average number of stores visited per shopping trip, which is shrinking. This is driven by many factors including BOPIS, KB4YG, and the treasure hunt experience of many retailers that facilitates the consumer making the individual store the destination and not the Mall.
This seems to be a hard topic to tackle without reviewing a bunch of data points and drilling into regional differences and climates. In the past several years, Florida, Texas and even Georgia and South Carolina have grown while New York, Pennsylvania and others in the North have declined. Basically, regions that typically could have more open markets have grown in population so that could be impacting the national numbers from a geographic standpoint. More data is needed.
This sounds old-fashioned, but stores in strip malls are easy to see, and customers can park near the store they want to visit. My walking-distance mall in Sarasota is closed because neither of those things are true.
Yes! And strip malls often contain stores you need. Whereas traditional malls contain a lot of discretionary stores that you can take, or leave!
So much less hassle. No mile long walks, easy and free parking. Decent prices and good products. What’s not to like?
the odd part is category killers, once the mainstay of strip centers, are pretty much dead.
When I saw how crowded the new outdoor mall near me was in January, I live in Minnesota, I was surprised. People were happy to brave 10-degree temps to experience an outdoor shopping experience. Counterintuitive if you ask me. What’s the draw? First off, these new shopping centers are *new*, which is a huge draw in itself. But to sustain interest, they need more. These developments also feature dining and entertainment options that attract people looking for an outing, not just a shopping trip. Some of these developments incorporate professional offices, services, and residential spaces into the plans. They’re recreating a walkable neighborhood experience that has been missing in the suburbs, which I believe is an attraction for many.
There’s no question that strip malls have a content and a convenience advantage over traditional malls. Proximity of parking to a favorite store is important. A time-pressured visit to a strip mall is a completely different experience than a leisurely stroll through the mall. Now let’s see what evolution comes up with as anchors vacate malls and the space must be completely rethought. The right mix might be able to recreate the town center experience.
Today, we live with time pressure. Be it real or perceived, it surely exists. We also have many more options for our time. That big mall is no longer entertainment, there are so many better alternatives.
Convenience, omnichannel choice and proximity to home for remote and hybrid workers will keep open-air centers in-demand. Open-air centers are ideal for time savings, especially if the retailers you need are clustered together.
Yet indoor malls are still havens for younger shoppers who don’t drive. Everything they want is under one roof, including opportunities to socialize. New investments also revitalize Class A malls, which are evolving as vibrant, multi-use spaces that entice consumers of all ages to shop in physical stores.
The customer/consumer who visits a store at a strip mall isn’t looking to get out of their car and walk by multiple stores, as one might do in a traditional mall. They are typically destination shoppers. It’s nice when there are two stores the customer needs to go to in the same open-air strip mall, but typically, customers are on a mission to visit a specific store.
Would be great to see the data for this by region. While I’m one of the first to say I enjoy open-air centers more, I would caveat that by saying “only between the months of April to October” where I live. Areas that get cold weather will always have to rely on in-mall locations, especially during the critical holiday season.
It wasn’t all that long ago that every mall in the country was trying to weatherize itself — code for enclosing the complex with a roof and walls — in a bid to create a pleasant shopping environment. The best indoor malls are still thriving but the open air centers may be doing well for an entirely different, non-weather-related factor: they just have a better mix of tenants. Not just stores, but restaurants, entertainment, service providers and more. But it starts with the stores. They have brands and nameplates that have stayed away from enclosed malls and they are the ones that are being most pro-active in enticing shoppers to come by. It’s always about the mix of retailers first.
Class A malls remain vibrant and fairly successful. Class B/C/D malls should really be torn down — but — Not Meaning to be mean — let’s face reality–these are likely write off’s and will remain sad dark places with variable areas of leaking roof.
Open air centers — and Strip centers are on fire– Easier, Faster, And some might say potentially with a safer feel than the old style Mall–whether that is true or not probably has many variables. I beleive that given lifestyle today–Strip centers will continue to be on top and popular with customers. Thanks All!
Absolutely, I see several factors favoring the ongoing success of open-air centers. Their convenience, diverse tenant mix, and focus on experiences resonate well with modern consumers. Additionally, the rise of remote work has increased traffic in suburban areas where these centers thrive.
However, competition for prime spots in open-air centers will intensify as more retailers pivot to off-mall locations. Overall, open-air centers have a significant momentum, they must still adapt to evolving trends and consumer needs to sustain their success in the long term.
We live in the experience economy – mostly the “open experience” economy. Festivals, street fairs, concerts, outside dining, outdoor activities, etc. That is the most visible and visceral of human pursuits right now. Open-air malls like those in CA and AZ are some of the most marveled shopping experiences in the U.S. They are always going to win because they give people the feeling of connection to our outdoor environments with a better user experience design than closed in malls. It’s the UX/UE as the separator – a proverbial walk in the park + shopping.