Commercial Financing Super Regional Malls – Description and Design

Super-regional shopping malls represent the largest single concentration of retail shops in the shopping center format. Super-regional malls, often more than one story in height, may exceed 1 million square feet in leasable area. A few “super-regional” malls are in excess of 2.1 million square feet; however, most are between 1.1 and 1.5 million square feet of gross leasable area. The term super- regional indicates that the market area the center serves has a population of 300,000 or more. The term mall indicates that the shops are to be clustered around a core area usually restricted to pedestrian traffic. Most of the recent successful super-regional malls have been totally enclosed, roofed, and air-conditioned. The tenants lease space for their merchandising area, plus basements and other storage space, employee rest areas, and offices. Tenants also pay a pro rata share of the expenses of operating the enclosed, purely public spaces in the mall; each share is based on a formula of the tenant’s percentage of gross leasable area to the total leasable area.

Super-regional malls are generally “anchored” by at least four major retail departments stores. These huge retailers have advertising budgets, reputations, and size that generate considerable shopping traffic. Anchor tenants often demand and receive rent concessions; they may even build and own their own buildings on space donated by the developer to attract them to the mall. In terms of rent paid, the anchors usually offer only break-even benefit to the developer; however, they are often key to the success of the other retailers, who pay higher rents to make up for the anchors’ concessions.

Besides the anchor department stores, a variety of other tenants are attracted to super-regional malls. The 10 most prevalent mall tenants (after department stores), listed in order of their occurrence, are

  • women’s ready-to-wear shops
  • jewelry shops
  • fast food carryout restaurants
  • menswear shops
  • women’s shoe stores
  • women’s specialty clothing shops
  • family shoe shops
  • card and gift shops
  • department stores
  • special apparel–unisex clothing shops

The design of the super-regional mall is often critical to the success of the non-anchor chain stores and local tenants. Such tenants get the exposure they need from the pedestrian traffic between the anchors. A four-cornered pattern creates the maximum amount of traffic for local shops. If a mall includes tenants such as restaurants or movie theaters, which create their own traffic, a central location on the pedestrian path is less critical. (Often, restaurants and movie houses will be segregated, if possible, as they often cause congestion and litter that are inconvenient to other tenants.)

In addition to higher rents per square foot of leased space, retailers pay more to operate in a super-regional mall than to operate in an open-air or “strip” shopping center. This is primarily because mall tenants must pay a pro rata share of the cost of heating, cooling, and cleaning an enclosed pedestrian space.

Chad Mayes is the creator of CEMLending Connection [http://www.cemlending.com], a resource which provides commercial mortgage loan financing and residential refinance and purchase options. This article is copyright of CEMLending Connection [http://www.cemlending.com]. This article may be reproduced as long as author’s name and all links remain intact.

Community Shopping Centers – Description and Financing

Community shopping centers generally have less than 200,000 square feet in gross leasable area. They may be designed as enclosed or open-air malls or as strip centers. The centers are organized around one or more of the major national or regional retailers, one or two “junior” department stores, or a store owned by a company specializing in smaller department store operations. A junior department store will generally have between 30,000 and 50,000 square feet and feature a full line of soft goods (clothing, books, and so on) and often some hard goods (appliances, furniture, and so on).

In the 1980s, major national and regional discount department stores emerged as new, significant anchors for community shopping centers. Retailers such as K-Mart (of the S.S. Kresge Corporation) and Wal-Mart became the dominant force in retail sales growth in the United States in the late 1980s. These stores, usually between 75,000 and 125,000 square feet, compete for discount shoppers with merchandise priced below that of the traditional department store. These super-discounters have become the most popular anchors in many new community strip centers because of their heavy advertising, low prices, and excellent locations, which generate shopping traffic.
Community shopping centers generally require trade areas with populations of 100,000 or more. However, these centers are often located in smaller towns that serve as a shopping area for a larger, multi-community area. Besides the anchor stores, the 10 tenants most likely to appear in these centers are:
women’s ready-to-wear shops

restaurants (with liquor service)

fast food/carryout restaurants

beauty salons

family shoe shops

jewelry shops

card and gift shops

restaurants (without liquor service)

women’s specialty clothing shops

banks

In strip centers, the anchor usually has a central location; if there are several anchors, they are separated. It is important to remember that because of the
weather-exposed design of strip centers, shoppers generally walk for shorter distances between stores to shop than is the case in an enclosed mall area. Rents in strip centers will generally run 40 percent to 60 percent less than those found in similar retail areas in enclosed malls. As a rule, sales per square foot will be correspondingly lower than sales in enclosed malls.

Like major department stores, food stores are destination stores. The other tenants depend to some extent on the occasional or impulse sales afforded by a good location in the pedestrian traffic pattern between the larger stores. Like the anchors in large super-regional malls, destination stores in community shopping centers often pay rents that cover only the costs to the center’s owner; the more specialized retailers pay rents that represent true profit potential.

Regional Shopping Centers – Description and Design

The tenant profiles of regional centers differ
little from those of the super- regional malls. The tenants in regional malls
paying the highest rent and having the highest sale’ volume per square foot of
tenant area are also similar to the tenants of the super-regional malls. Many
tenants occupy very little square footage and have relatively low actual sales
volume.

The term regional shopping center also can apply to very large strip
shopping centers. The term strip center generally refers to a shopping
center with a single line of tenants or single-side design, in contrast to a
mall in which shops face one another across a pedestrian area. A regional
shopping center features one or more regional or major department stores, each
at least 100,000 square feet in size. The
strip center may also feature a food store, which is seldom found in malls.
Strip designs for regional centers are most often found where inclement weather
would not deter the pedestrian traffic necessary between the anchor tenants and
the local tenants.

The term power center denotes a regional strip center of unusual size.
Often 300,000 to 500,000 square feet or more, these huge centers feature a
preponderance of anchor tenants with less than 15 percent local tenants. They
often combine off-price or home-improvement customer appeal.