Mall's key factors for perpetual growth and sustainability
Private equity firm SVP Global, the current owner of WPG, has announced plans to sell all of its assets, which include a portfolio of what is being called evergreen malls and another of higher-end open-air centers.
The term "evergreen" in this context, as defined by Chris Conlon, refers to malls that are strictly B malls and require minimal evolution to last. These malls are considered the best in their town or the only game in town, located in secondary or tertiary geographies, and have sales that are steady or even growing. They also have a rent-to-sales ratio of 12% or less, overall occupancy in the low- to mid-90%, permanent occupancy in the low- to mid-80%, and a rents and net operating income growth trend of 1% to 3%.
However, the concept of evergreen malls is not universally accepted. Jake Bracken, Vice President of Advisory Services at Green Street, notes that terms like "evergreen" and "non-core" go beyond industry-accepted A to D rating scale and are not generally employed in Green Street's research. Nick Egelanian, on the other hand, is less optimistic about the concept and believes that each property should be evaluated to determine its highest and best use.
The evergreen status of a mall is dependent on its ability to attract a new type of anchor, such as Dick's House of Sport, a grocer, or an experiential concept. However, the vulnerability of evergreen malls becomes apparent when legacy anchors like J.C. Penney and Macy's depart.
B-Plus-Malls, as described by Bryn Feller, Managing Director and Senior Vice President at Northmarq, refer to shopping centers typically located in secondary or suburban urban markets—often outside primary downtown areas—serving communities with convenience retail and essential services rather than luxury or flagship stores. Feller describes these malls as "evergreen" if they have enough critical mass to remain sticky for a decade or longer.
The heyday of the mall, as we knew it in the 20th century, is over. However, the strong recovery in retail post-Covid has sparked renewed interest and investment in B malls. Dillard's took a stake in a mall in eastern Texas, Walmart acquired a mall in Pittsburgh, and Simon Property Group announced plans to fix up some of its B malls.
Despite the renewed interest, Egelanian warns that malls that are hanging on could be easily devastated if a new development were to come to town. He suggests that the mall model no longer works and that properties could easily be devastated if a new development were to come to town.
In contrast, Conlon states that A malls are doing well, while C and D malls are accelerating towards extinction. This leaves a question mark over the future of evergreen malls and B-plus malls, as they navigate the changing retail landscape.
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