According to Moody’s REIS, despite regional and super-regional shopping centers enduring record vacancy rates of 11.4% in Q1, there is hope for an explosion of foot traffic as 2021 marches on. Movie theaters could not have reopened at a better time now that malls nation wide are quickly welcoming back pre-covid foot traffic. Malls in the month of March saw an 86% increase in visitations year-over-year.
California’s largest population centers are beginning to crawl out of the most restrictive tiers and into less restrictive ones that allow for people to actually congregate.
A lot of the optimism stems from the increased vaccination rate that states including California are witnessing. Anyone who is 16 years or older is now eligible to receive a vaccine which makes the thought of reopening entertainment venues much more plausible. It has been known that movie theaters acted as anchors for shopping centers because they generate high foot traffic while also trickling crowds into neighboring stores driving up revenue for many. The bulk of all properties that had a movie theater tenant relied on that tenant heavily, you can look at the $31-billion that were bound to the woes of properties with movie theater tenants.
The sector has been shortening year-over-year gaps since Nov., and when comparing to 2019 numbers, the visit gap is a tapering 23.9% according to the analysis firm. Feb. and March were monster months for malls as they enjoyed over a 40% boost in visitations from January.
“Does this mean the mall sector has completed its recovery? Certainly not,” Placer.ai’s Ethan Chernofsky writes. “But it does mean that top tier malls throughout the country still have exceptional strength. Their continued capacity to rebound quickly when given the opportunity speaks to the continued strength in the sector, and explains why the format still deserves its lofty position within the retail landscape.”GlobeSt.com
But retail had it’s challenges even before the pandemic…
Omnichannel companies who have been perfecting their online shopping experiences and e-commerce efforts are shifting the consumer experience away from physical locations. This phenomenon has been detrimental to many stores that cannot offer the same level of customer service. Now, ontop of vacancies due to the pandemic, you begin to understand why many shopping centers are opting to redevelop vacant retail space into mixed-used areas.
“There is an awesome opportunity and demand from the marketplace to be here, to reposition the mall into something different from what it is today,” Rogers said. “We have an opportunity in front of us to pretty dramatically alter what everyone sees over there and create a real community.”
Certain D.C. area malls are considering entering the multifamily and hospitality markets in order to redevelop vacant property. The idea of building communities within large scale shopping centers is nothing new. Places such as The Americana at Brand, in Glendale, or Mall of America, in Bloomington, Minn., are already implementing the concept that allows for self-sustaining foot-traffic. Undoubtedly tenants living in shopping centers will spend their money there as well.
In short, the mall of the future may be more of an entertainment experience rather than a shopping experience with much of the transactions done online, and limited inventories at the physical store. With movie theaters acting as the driving force behind a flourishing shopping center, housing could be the next income producer shopping centers need given all trends pointing to a safe reopening of cities and states.