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Macy’s is expanding investment in strip malls with smaller stores

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Products at a Macy's Backstage outlet.

Macy's is building out its smaller-footprint concepts like Macy’s Backstage. They'll be located in strip malls, where consumers can make quicker shopping trips. Eugene Gologursky/Getty Images for Macy's, Inc.

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With the fall of the shopping center has come the rise of the strip mall. Macy’s is the latest retailer to announce it’s expanding its presence at outdoor malls through the smaller-footprint concepts Market by Macy’s and Macy’s Backstage.

But why exactly have strip malls become so popular, especially during the pandemic?

The retail world has its own food chain of sorts. Commercial real estate investors tend to pour money into what retailers want. Retailers tend to pour money into what consumers want. And Christina Boni, a retail analyst at Moody’s, said that what consumers want is low-stakes, low-commitment shopping. 

“How far you have to walk from where you park, how you get to the store itself, the ease of entry. Those things are just much more conducive in a striplike situation as opposed to a mall,” she said.

Strip malls make it easier for people to pop in and not just buy, but also return items. And they can also lend themselves to not popping in at all.

“One big driver, certainly, I think, is the acceleration of buy online, pick up curbside,” said Brandon Svec, the director of retail analytics at CoStar Group.

Curbside pickup has became one of the shopping hallmarks of the pandemic. Svec’s proof that it’s boosting interest in strip malls? The current strip mall vacancy rate is at 8%, he said.

“That is well below even pre-pandemic levels and is at its lowest level since before the great financial crisis.”

But not all strip malls are equal; there’s an equation that makes them work. Conor Flynn is CEO at Kimco Realty, which owns about 570 open-air shopping centers across the U.S. A good strip mall starts with a good anchor tenant, he said — big names like Macy’s or Target that drive traffic and reliably pay the rent. 

“And then what you do is try and have a coffee person, the best bagel person in the morning. You know, the best sandwich shop for lunchtime,” he said.

Then add in a gym, a hair salon, an urgent care center, “and you continue to sort of build out a suite of services that’ll drive traffic at all points during the day.”

Malls used to be about going to a destination or socializing or having some kind of experience. Now, they’re more about checking everything off your to-do list.

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