Continuing our theme from last month, the Wall Street Journal recently published an article titled The Hottest Real-Estate Play Is in Your Neighborhood. The article highlights the growing popularity of strip retail centers.
While other CRE sectors face challenges, strip retail is thriving due to retailers wanting to be closer to where customers spend more time—at home in the suburbs. With more Americans working from home and often on flexible schedules, a local strip mall is usually the closest shopping option. Lunch spots and personal-care businesses — like massage studios and dentists — are especially in demand. Even chains often found in malls, like Abercrombie & Fitch and Foot Locker, are eyeing a move to “off-mall” locations.
According to Green Street, the first quarter saw leased occupancy rates at strip mall REITs reach 95.3%, a figure not witnessed in eight years. Physical occupancy remains stable at 92.4%, mirroring levels before the pandemic. These are all positive trends for retail properties, providing vital jobs, services, and tax revenues to their markets.
It is good to see investors looking at retail for all the right reasons, including low vacancy, steady rent growth, and strong demand for vacant spaces.