Demand Pushes Single-Tenant Retail Rents and Prices

Necessity goods chains, restaurants, experiential operators and other occupiers of single-tenant retail buildings are growing faster than developers are building new space, according to Marcus & Millichap. Vacancy among single-tenant retail properties in the U.S. hit a record low of 4.3% at the end of 2023, the firm reported, while mean asking rent reached an all-time high. The single-tenant retail property segment posted a third straight year of minimal new supply under construction in 2023, according to Marcus & Millichap, and the amount underway as of January represents 0.3% of existing stock. Plus, that’s build-to-suit, meaning developers are taking zero risk.

Investors paid top dollar for such properties in 2023, and they’re willing to pay even more for the right ones, according to The Boulder Group. For example, a freestanding Chipotle in Margate, Florida, sold for $1,856 per square foot in November, according to the firm. The national average cap rate for single-tenant retail properties climbed 8 basis points year over year in the fourth quarter to 6.35%, according to its research.

Quick-service chains are at the forefront of this expansion, particularly those with drive-thrus. Marcus & Millichap reported a miniscule 1.3% vacancy rate for fast-food properties at the end of 2023. This trend is expected to continue as major players like Jersey Mike’s Subs and Chipotle plan aggressive growth in 2024, each targeting more than 300 new locations.

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Tiffany Will Headline Mall Food Court

The ’80s will be back this year in the form of “strong shoulders,” leather trench coats and bomber jackets, according to Vogue, and in the form of pop singing sensation Tiffany, according to the Greater Topeka Partnership. The partnership — which represents the chamber of commerce and local tourism and economic development interests — will hold its annual meeting, with a 1980s theme and a performance from Tiffany, on April 4 in the food court of West Ridge Mall.

But Topeka isn’t living in the past. A panel during the meeting will discuss redevelopment projects throughout the area, and West Ridge Mall itself is a big one. Financial and investment services company Advisors Excel acquired the 992,000-square-foot property in the fourth quarter and plans to remake it into a lifestyle center, including office space for its own headquarters, serving as many as 1,000 employees. “Emerging from the pandemic, our company recognized the value of working together in the office,” said Advisors Excel co-founder Cody Foster. “Our vision was to reinvent what a workplace and company culture can look like through the creation of a holistic campus experience that connects corporate office space with retail, dining and entertainment opportunities younger professionals seek.”

West Ridge Mall opened in 1988, a year after Tiffany released her eponymous album and embarked upon a mall tour that would come to define mall tours. It also would become the stage for hit song I Think We’re Alone Now’s music video.

By 2021, the mall’s occupancy had dropped to 39%, but that didn’t ring the property’s death knell. Instead, Advisors Excel plans to reinvent the property with new dining, retail and community spaces. Russell Glen — a company that has the experience, having reinvented a community around RedBird Mall south of Dallas — will join the cause.

Projects like RedBird prompted C+CT to report in December 2020 that Malls Aren’t Going Extinct. They’re Adapting. And even as many malls evolve into town centers — as at Great Northern Mall north of Syracuse, New York — and into lifestyle centers — as in Topeka — the world doesn’t seem eager to say goodbye to malls. The 2022 book Meet Me by the Fountain: An Inside History of the Mall drew loads of attention. And In November of that year, C+CT ran a story called Is the Term “Mall” Making a Comeback? Answer: Yeah, actually.

And according to the Los Angeles Times, that owes to more than just redevelopment efforts or Gen X nostalgia. “Malls have rebounded thanks to an unlikely source: Gen Z”, the outlet reported. Note that Gen Z, starting at age 12, is the very same age as Gen X was when it turned out in droves for Tiffany nearly 40 years ago. Turns out Tiffany and the mall really are timeless.

—Commerce + Communities Today Editor-in-Chief Amanda Metcalf