Green Street analyst Paulina Rojas Schmidt, who also serves as the firm’s Strip Center Sector head, sat down with Green Street’s Managing Director and Head of U.S. REIT Research Michael Knott to discuss the opportunities and challenges facing the Strip Center Sector during Green Street’s It’s Not All Doom & Gloom webinar in mid-June. 

Some may consider the retail sector to be in the midst of a renaissance period, given that the industry has climbed back from the depth of the pandemic in 1Q 2021, at a pace that has been faster than what we expected, with a positive outlook moving forward.

A Retail Renaissance Is Emerging

In terms of physical occupancy, the sector is on average where it was before the pandemic: sitting at approximately 92%. According to Rojas Schmidt, the Strip Center sector experienced a fast recovery, and retailers’ store opening plans have not been deterred by the clouded macroeconomic environment. 

The job market continues to create positions, which will sustain forecasted M-RevPAF growth of 2-3% between 2023 and 2024. This forecast is anchored on Green Street’s view of the GDP declining modestly later this year and returning to growth in ‘24. 

“Even if we had a decline in tenant retention and occupancy dipped, there is conviction that the pullback would be temporary, part of the cycle, and that landlords would be able to re-tenant that space within a reasonable time frame, without sacrificing rents too much. Three years ago, the consensus view was much more negative, ecommerce was expected to result in a secular decline of brick-and-mortar retail. So, it feels like we’ve hit a bit of a retail renaissance.” 

She goes on to discuss the favorable supply aspect, with high occupancy levels and no new material supply, allowing for a great starting point for the months ahead. She ends with a long-term view that rent is growing similarly to inflation, if not better than that.  

Having emerged “revitalized” with strong tenant demand and limited new supply cementing landlord bargaining power, conditions in the Strip Center sector have improved since pre-Covid and will continue to thrive, along with other Retail property types. 

For more insight on the Strip Center sector, contact us to subscribe to Green Street Research: https://www.greenstreet.com/contact-us. You can also click here to register and watch the full replay of the webinar, "It's Not All Doom & Gloom: Midyear Sector-Level Takeaways."