U.S. Outlet Centers - State of the Industry
Post #3 - Outlet Center Trends
Landlords have been much more flexible in recent years especially post-Covid to include non-traditional outlet uses in their centers. This has allowed them to keep their occupancy and revenue up when pure outlet demand isn’t always up to the supply. This is especially prevalent outside the top 15 or so centers.
In the last few years traditional strip center players and off-price retailers such as Marshalls, TJ Maxx, Burlington, Five Below, Ulta and others have expanded into the outlet channel. The stores they have opened are generally the same concepts that they operate in other retail venues. The allure of high traffic in outlet centers (which previously were not made available to these tenants by those LL's) was until recently an untapped channel of growth for them (many are public companies). Outlet LL's have accommodated them where it makes economic sense for both parties (not in the best performing centers).
Additionally retailers such as Victoria’s Secret, H&M, Bath & Body and more recently Sephora have opened many full line stores in outlet centers over the last several years. Outlet shoppers have generally accepted these uses even though they are not discount concepts because of the strength of the brands and the ability to combine outlet and convenience shopping on the same day. LL's will hang their hat on “diversifying the tenant mix”, or giving the shopper what it wants, but there still remains a fine line regarding what is the acceptable discounting within each store and for an overall outlet center. What should not be lost in the discussion is this has certainly boosted occupancy rates in the industry. In essence the demand of these non-traditional outlet retailers has picked up the occupancy slack from the pure outlet play. So logically the higher performance the center is, the lower percentage of non-outlet uses there will be.
Further, outlet LL's have also realized that food courts are generally not the highest and best F&B offerings for their shoppers and have pivoted away from these to sit down restaurants, QSR’s and even food trucks. Economically these deals are typically not advantageous to LL's, however their view has changed regarding these uses to being a shopper amenity rather than necessarily the best economic deal on a space. What has helped this cause is that these centers have either been built in recent years closer than ever to populations, or the population growth in many markets has extended to older centers that were once considered remote and not sustainable other than weekend traffic for food operators.
Outlet LL's have also recognized that their centers have become a central part of the hyper-local communities that they serve, and have added uses such as spa, medical, recreation and other complimentary service uses.
Again, don’t lose sight that in many cases (of equal importance to LL) is that these are occupancy/revenue plays as well!
SR Human Resource Specialist @ Guilford Technical Community College (NC's 3rd largest community college)
1moI just went to Tanger Sevierville over the weekend. Definitely the best shopping. I wish they would put one in Greensboro or High Point. I also miss the one in Blowing Rock.