I’ve read a few thought-provoking articles recently about the state of the retail real estate marketplace that make the observation that A malls are generally doing better while B malls are continuing to tread water—or even beginning to fade away. Once again, I have to disagree on the B malls.
I think that kind of generalization is not telling the whole story. What seems to be missing from most of the articles I’ve read is the fact that there is substantial value still present in most B malls, (unlike the A malls which are already at their value capacity)—if you know what to look for, and are willing to put some effort into unlocking the value that exists within them.
It is important to remember that B malls are considered B malls because of performance, not potential. I think it’s a reflex for many analysts/articles to look at B malls as what they are, rather than what they can be—which is somewhat indicative of our industry. I think there may even be a misperception held by some that B malls are often in undesirable locations or have inherent and insurmountable structural/geographic limitations. Actually, I think that nothing could be further from the truth. The vast majority of malls—B malls included—are in a relatively prime location within their marketplaces. They tend to be in what is essentially the center of what I like to call the “retail magnet.” Generally speaking, in most cases, they became B malls as a result of increased competition, poor tenant mix, mismanagement or a combination of these factors.
So then how can you change that dynamic and unlock that value? I think it boils down to perception: B malls have to be thought about a bit differently than they used to be. The biggest and most important step is that owners and operators need to be a little more creative about how they tenant these malls. Typically, B malls are stuck with too much small shop space. They need to be thinking about how to move nearby “periphery” retailers into the mall—those that are in the power centers on the edge of the “magnet.” Let’s be honest, the retail lands