Restaurant brands looking to develop in Class A malls have their work cut out for them. So suggests a key finding in commercial real estate company Cassidy Turley's Spring 2014 Retail Review.
The report notes strong improvement in most retail product types and markets over the past 12 months, but shows a widening gap between vacancy rates in Class A versus Class C mall properties — roughly 2 percent versus 10 percent.
Other highlights from the report:
- Community/Neighborhood/Strip Center vacancies fell to 10 percent from 10.7 percent a year prior and 11.2 percent at the 2010 trough. The traditional mix of grocery and drug anchors and restaurants and retail services will bolster this segment in 2014, especially for Class A and B properties, but Class C properties will continue to suffer.
- Mall vacancy overall closed 2013 at 4.5 percent with the aforementioned gap between Class A and Class C product and Class B owners getting squeezed to compete with prime properties. Leading mall owners are adapting and shifting tenant mixes to accommodate more entertainment and restaurant tenants.
- Outlets/Lifestyle Centers tell a similar story. Class A outlet centers and malls were at 4 percent and 5 percent vacancy, respectively, at the end of 2013, while the overall sector was at 7.4 percent. The overwhelming majority of new development is in the outlet subsector.