Tenants defined as “small shop” tenants are performing well, and landlords are participating in their success. Small shop tenants are defined as retail tenants leasing less than 10,000 square feet. The growth of small shop tenants has universally increased across the portfolio of many of the major shopping center owners. Vestar, a Phoenix-based owner with over 70 properties, acknowledges that most of the deals that they are doing have been with small format retailers and that their portfolio is performing well with the highest occupancy and rental rates it has ever had. Kimco, with over 450 US shopping centers, announced it expanded pro rata small shop occupancy hit a record high of 90.8% during the 3rd quarter. Regency posted small shop occupancy of 92% or better over the past 6 quarters. The best performing and fastest growing small shop categories include fitness, health, beauty, food, and daily needs.
The performance and gains of small shop tenants have mainly been attributed to a healthy economy and an increasing consumer interest in beauty, health, and fitness. Landlords are reporting record high occupancies and rents for these types of tenants. Many of these types of tenants are being represented by a franchise model which proves successful for mom and pop businesses. With the franchisor, providing the tools and support for the franchisee, it frees up the individual owners to focus on running a solid business. For the purposes of positioning your shopping center long term, it is important to carefully consider tenant mix in order to include tenants of which are drivers of foot traffic and are least susceptible to being disrupted by the internet. Fitness Concepts based upon a subscription model, have been great tenants to include in shopping centers because of the way their memberships are structured. The evolution of this membership-based consumption model bodes well for retail shopping center owners and the adjacent tenants at these properties, adding retail foot traffic ensuring repeat business and more consistent trips!