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What's the percentage of restaurants in strip malls (plazas) in the US ?
Introduction
In 2016, there were 68,730 strip malls in the US, far exceeding the number of shopping malls, which is estimated to be approximately 1200.
Despite searching for strip mall statistics, industry reports, commercial surveys and polls, and studies; I found there is no publicly available analysis or hard data on the composition of strip malls nationwide, nor on the average percentage of restaurants out of total strip mall capacity.
During this search I drew on a string of sources related to the retail industry, including retail experts ICSC (International Council of Shopping Centers), commercial real estate and investment agencies such as JLL, Cushman and Wakefield and Reis, as well as business websites such as Business Insider and several others.
In order to garner some preliminary results to answer the question, we carried out an analysis of a sample taken from ten strip malls across the U.S.
According to this sample, there are on average 7.6 restaurants per strip mall, while restaurants occupied an average of 21% of overall capacity. The range in restaurants numbers varied from 1 to 21.
Methodology
An effort was made to ensure that this sample was representative of overall country-wide trends by including small to large-scale strip malls. In addition, the sample attempted to take into account differences in economic performance by including malls from both economically over performing and under performing regions in terms of strip mall profitability. For instance, JLL included Hawaii and Seattle as forming part of a "falling market" in terms of small shopping centers — including strip malls. The agency also includes Orange County, Philadelphia and Chicago in "rising market" and Tampa, Miami, Houston, Dallas, Los Angeles, Boston, Washington, San Francisco, Orlando, San Diego, Houston and Atlanta amongst "peaking market". For this reason, the sample plazas were selected from across these regions.
The malls within these geographical locations were selected at random from the information available on the internet. Nonetheless, the overall results might be slightly weighted towards larger plazas, as there is more information available for restaurant and total store numbers for larger establishments. However, this tendency was offset where possible.
The malls sampled were:
Falling Markets
— 8 restaurants out of 57 stores = 14%
— 4 restaurants out of 11 stores = 36%
Rising Markets
— 21 restaurants out of 40 stores = 52.5%
— 2 restaurants out of 21 stores = 9.5%
— 4 restaurants out of 37 stores = 10.8%
Peaking Markets
— 8 restaurants out of 36 stores = 22%
— 8 restaurants out of 58 stores = 13.8%
— 7 restaurants out of 48 stores = 14.6%
— 5 restaurants out of 24 stores = 20.8%
— 9 restaurants out of 58 stores = 15.5%
Average number of restaurants per strip mall: 7.6
Average percent of restaurants out of overall store capacity: 21%
Overall Market Trends
Media and industry reports suggest that strip malls have recovered somewhat from the retail crisis that has affected malls and shopping centers in recent years. This crisis has been attributed to the rise in online shopping over the past ten years, a surplus of malls, as well as to the changing habits of the average American citizen, who has swapped shopping for eating out with friends.
Part of this recovery is down to malls and shopping centers diversifying their commercial leases to include entertainment and restaurants, given that eating out is still an activity that can't be carried out online!
Though this trend is also evident amongst shopping centers and larger malls, diversifying tenants to include restaurants is thought to be a particularly effective market strategy for strip malls, given their tendency to service the needs of the local surrounding community.
As the ICSC has pointed out: "Smaller, neighborhood centers can actually benefit more proportionately from foodservice than larger properties, as a result of the ownership and connection (“social
glue”) that a strong and relevant food offer can engender within a local community".
Conclusion
In short, food and beverage establishments are a growing market, both within closed malls and plazas. They are also seen as a relatively safe bet for surviving the onslaught of e-commerce against retail.
In terms of the average percentage of restaurants per strip market as against other stores, our sample result of 21% is just above the data the client found in relation to enclosed malls (18%). This suggests that food and drink establishments occupy a greater percentage of strip mall capacity, albeit a minimal difference, in contrast to enclosed malls. A possible explanation for this could be the direct links between plazas and the surrounding community highlighted by the ICSC, which favor activities and entertainment over and above shopping.