Strip malls are seeing a surge in valuation, perhaps due to Americans’ desire for the in-and-out convenience that they offer due to their proximity to main roads. Once seen as eyesores, some strip malls are getting face lifts. With many Americans working from home at least a few days per week, consumers are craving accessibility, one-stop shopping and easy parking. As a result, strip malls are seeing an increase in foot traffic during weekdays. Trips to strip malls increased 18% in 2022 compared with before the COVID-19 pandemic. Most visitors of strip malls are hyper-local and visit the centers frequently and for short durations. 

Traditionally, retail shopping centers outside of malls included one or more large anchor tenants (e.g., a grocery store), but in contrast to anchored shopping centers, strip malls are comprised of a row of exclusively smaller shops typically lining a major road and lack a large anchor tenant. Strip malls without a strong anchor tenant were previously seen as risky investments and were mostly owned by local developers, but recently, large national developers and institutional investors are seeing dollar signs as they eye adding strip malls to their asset portfolios.

Strong national chains such as Starbucks are moving into these strip malls and average rents for strip mall space reached a record high in the third quarter of 2023. With stronger rents and big-name franchises entering as tenants, existing strip malls are seeing strong profits both from an owner standpoint and a tenant/business standpoint. Available space for rent at strip malls is at a record low and even nationally recognized tenants find themselves competing for space.

Macy’s recently announced that they will open up to 30 smaller format Macy’s stores in strip malls, citing evidence that the smaller strip mall Macy’s have performed better than their in-mall locations. With so much traditional merchandise being available online (clothing, housewares, etc.), strip malls tend to attract more service-oriented business such as nail and hair salons, specialty coffee shops and fast casual lunch spots. Consumers are returning their packages, picking up something to eat and getting a quick haircut all on their lunch break within the same small row of shops. With hybrid work arrangements remaining in place, strip malls may well continue to see strong growth into the coming years.