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.”