Green Street



Annual Mall Grade Review: Mall Performance Improves

It’s back-to-school time for many students across the U.S., but they aren’t the only ones that will be graded on their performance throughout the year. Green Street also performs an extensive annual review of more than 1,000 publicly and privately-owned malls and outlets – for students of commercial real estate. In a new report entitled, Mall Insights: Annual Grade Review – On the Upswing, Managing Director and Mall Sector Head Vince Tibone provides updated estimates for mall and outlet operating metrics, as well as “grades” for both asset types. 

What are Mall Grades and why are they critical indicators for retail real estate investors and other market participants? Green Street’s proprietary Mall grading system contains multiple criteria to capture all the benefits of brick-and-mortar retail. “These factors are influential components of mall and outlet operating performance and are given material consideration in arriving at a cap rate grade and (property) valuation,” explains Tibone. 


Green Street analyzes four main factors to arrive at its innovative Mall Grades, including:  

  • Tenant mix – Anchor and inline tenant quality as well as entertainment options  
  • Productivity – Sales per square foot, total mall sales and foot traffic 
  • Location – Redevelopment potential and competitive asset positioning  
  • Condition – Curb appeal and future cap-ex requirements  


The A,B,Cs of Mall Grades
The fundamental outlook for U.S. malls varies drastically by quality grade. 'A' malls, which comprise  25% of the total malls analyzed by Green Street, continue to maintain their competitive edge, Tibone reports. 'B' malls have proven more resilient than previously thought, with a large portion able to survive and stabilize following the pandemic. Meanwhile, the retail prospects for most 'C' malls are generally dire, many will be repurposed with another real estate use over the next decade.

Foot Traffic Declines Modestly
U.S. mall foot traffic is down 5% year-to-date versus the same period in '22, with the Pacific and Northeast regions experiencing slightly better volumes than the rest of the country. Outlet foot traffic declined 7% year-to-date, with stronger foot traffic trends in the Midwest. In a post-pandemic, inflationary environment, muted foot traffic volumes will likely remain the new normal.

In pre-Covid economic cycles, mall productivity and foot traffic activity typically moved in lockstep. The complex divergence from this relationship has been further muddled by lingering inflation and changing consumer behavior such as higher in-store conversion rates, and fewer but more intentional shopping trips. Strength in the luxury segment skews sales positively but is less reliant on overall foot traffic.

The Sales Productivity Input
Green Street estimates sales productivity averages for each mall grade based on 1) REIT disclosed property-level tenant sales, 2) conversations with market participants, and 3) privately-owned mall performance, when known. “The sizeable jump in sales per square foot thresholds for 'A++' and 'A+' malls can be attributed to healthy performance from the luxury segment which was previously understated,” according to the report.

Mall/Outlet Upgrades Outnumber Downgrades
Of the more than 1,000 retail assets on Green Street’s platform, approximately 250 experienced a grade change, with 35% occurring in the REIT portfolios. “This year, Green Street upgraded more malls and outlets than it downgraded, which is a rarity,” explains Tibone. 

Many retail landlords successfully resolved anchor vacancies and improvements to merchandise mix and overall tenant quality, resulting in more upgrades than downgrades, Tibone reported. Successful anchor backfilling initiatives in '22 reduced estimated anchor vacancy counts by 30% to 450 boxes. 

Redevelopments – On the Rise?
As the brick-and-mortar landscape continues to evolve, one thing is for certain: redevelopment plans have increased on a year-over-year basis. Roughly 35% of total mall and outlet supply has a proposed redevelopment plan in the works, though when those projects will come online remains to be seen. A total of 17 malls closed their doors in 2022, in line with Green Street’s projection of 15-20 mall closures per year in the near term.

For more information on Green Street’s proprietary Mall Grades, to view our Retail Database or to subscribe to Green Street Research, contact us today: 

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