PYMNTS Intelligence Alternate Banner June 2024

Shopping Center Vacancies Hit Lowest Level in 20 Years

Don’t write any obituaries for the American shopping center just yet.

As The New York Times (NYT) reported Sunday (June 9), retail landlords are now finding themselves with soaring demand for spaces

As construction declined and underperforming stores vacated, landlords began signing up tenants that would draw more traffic and keep people hanging around — restaurants and recreational activities like pickleball — leaving less room for more traditional retailers like book or clothing stores.

Among the shopping centers tapping into this trend is the largest one in North America. Mall of America announced last month its plans to open an on-site, game-show-style amusement center, Great Big Game Show, where shoppers can play the sorts of games they may see on TV: races, trivia competitions and other challenges, with all the trappings of the traditional game show (buzzers, a live host).

“By offering on-site experiences, malls can keep consumers coming back, giving them a reason to visit physical mall locations, which in turn can help drive foot traffic to all retailers in the mall. Plus, experiential offerings encourage shoppers to spend more time on site,” PYMNTS wrote at the time.

“When visitors engage in activities such as dining at themed restaurants, attending events or participating in other activities, they are likely to stay longer and consequently may spend more at other retail stores.”

Because of this shift, “there’s not as much redundancy from tenants, and landlords are creating much more robust tenant mixes,” Barrie Scardina, president of Americas retail services, agency leasing and alliances for Cushman & Wakefield, told the NYT.

“We are seeing some of the most productive occupancy recorded in the last 10 years.”

Her firm recently reported that shopping center vacancy is the lowest it has been in two decades, at 5.4 percent, giving landlords the upper hand in lease negotiations.

Meanwhile, recent PYMNTS Intelligence research finds that smaller retailers who rely solely on brick-and-mortar traffic are in greater danger of closing than those who depend on eCommerce or employ an omnichannel strategy.

The study, “Main Street SMBs’ Revenues Grow Faster than GDP,” showed that 9% of firms that sell primarily in physical stores were in danger of closing, compared to 7% of those that rely on eCommerce and less than 5% of businesses that have a roughly even split between digital and brick-and-mortar channels.

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