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Strip Malls Turn Heads

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Real Estate Agent with REMAX Advance Realty II 3233262

Between the economic downturn and the game-changing rise of online commerce, the bricks-and-mortar retail sector has taken some huge hits in recent years. But there’s a bright spot in the business of shopping that has been conveying significant benefits to commercial brokers: strip malls.

"There is still a strong need for strip centers,” says Rob Grossman, COO of the strategy & operations practice with Deloitte Consulting. Vacancy in strip and community centers fell by 30 basis points in 2012 and, at the beginning of 2013, sat at 12.8 percent nationwide, according to CRBE Econometric Advisors. Newer properties, particularly those located in high-density areas with strong employment, report even lower vacancy rates, says Julie Taylor, senior vice president of the Retail Services Group at Cornish & Carey Commercial Newmark Knight Frank in San Francisco.

Investors like strips, too. Almost 60 percent of respondents to the “Emerging Trends in Real Estate 2013” survey tagged community and strip centers a “buy.” Why? “Strip centers are in demand because they are easier to manage and lease than larger centers and the rate of return can be 8.5 to 9 percent, 50 to 100 basis points higher than for a community center,” says Mez Birdie, CPM, director of retail services for NAI Realvest in Orlando.

Strips also fill a basic consumer need. “The traditional value proposition of community/neighborhood,which generally includes a grocery or drug store—or a smaller strip center anchored by a convenience store—hasn’t really changed. These properties still provide an easy way to access the products you need every day, [which] hasn’t really changed,” says Grossman. “Even in the age of online retailing, there are some items you don’t want to wait a day or two to get.”

At the same time, warns Grossman, simple convenience may not be enough to ensure success. “Today, centers need to merge convenience with destination and services that can’t be obtained through an online channel. A good location isn’t sufficient.”

Instead, smart shopping centers must create “that right third place after work and home where people want to congregate. It’s by far the best way to increase traffic to the entire center,” says Greg Carbone, CCIM, CPM, director of property operations for EDENS in Bethesda, Md. So how can owners and managers position their centers to capture the brass ring?

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