Major owners of strip malls, such as the Federal Realty Investment Trust, are aware of the outlook and closings. Mall tenants in popular locations have re-strategized to transform malls into entertainment locations, shifting from retail-focused tenants.
Amongst these new tenants are gyms and fitness centers. Market data suggests that implementation of boutique gyms draws more affluent customers and fit closer into the newly established parameter. Fitness centers have also been attractive due to market growth; memberships of health clubs have jumped 26% since 2009. As a result of these factors, landowner of over 115 malls, GGP, wants over half of its malls to contain fitness centers by the next decade, and Phillips Edison & Company has already implemented fitness centers in over 40% in its 340 grocery-anchored shopping centers.
Nevertheless, Retail property landlords are overwhelmingly suffering at the moment while this transition takes place. Tenants are taking advantage of store closures and bargaining for cheaper and more flexible leases. An aggressive growth in this behavior could prove the transition to entertainment difficult.
Keith Knutsson of Integrale Advisors commented, “A shift of strategy in a failing business is to be expected. If foot traffic is permanently affected by online sales, a pivot is needed.”