Surge In Open-Air Retail Across Suburban Markets: DLC's Latest Insights

DLC, one of the largest private owners, operators, and managers of open-air retail in the country, has published a research paper titled "Too Good To Ignore." The report highlights the significant growth of open-air retail in suburban markets. For the first time in over two decades, key metrics for retail real estate—traffic, tenant sales, rent, and occupancy—are surpassing previous records.

DLC's portfolio exemplifies this trend. Last year, DLC’s same-store NOI growth reached 6.6%, outperforming public competing open-air REITs. The report notes that no new development has occurred in open-air retail for the past 15 years. Additionally, construction costs have surged by 30% to 40% over the past three years, intensifying competition for available space.

In 2023, DLC lease renewals for spaces exceeding 10,000 square feet hit 98%, with the average time to lease vacant retail space at an all-time low. Store openings outpaced closings for the third consecutive year, particularly in suburban and non-major markets outside the top 25 MSAs. DLC signed 127 new deals in suburban centers in 2023, compared to 84 in 2019.

Value Retailers Lead Growth

Value retailers such as T.J. Maxx, Burlington, Ross Dress For Less, and Five Below are driving retail growth. These retailers receive two to three times more visits than overall retail. Over 50% of DLC’s tenants are value retailers. The tenant mix is also evolving as non-retail businesses occupy open-air retail spaces to be closer to consumers.

Shift in Tenant Mix

Traditional mall brands like Macy’s, Ulta, Claire’s, and Kay Jewelers are moving to neighborhood centers. For instance, DLC recently relocated Ulta, Bath & Body Works, Old Navy, and the Buckle from an enclosed mall in Carbondale, IL, to its open-air center University Place.

In-Store Sales Dominate

Nearly 85% of total retail sales occur in-store. Shoppers spend between 30% to 50% more per visit in-store compared to online shopping. Up to 40% of shoppers using click-and-collect also purchase additional items when they visit the store. Retailers are now adopting in-store fulfillment to reduce customer acquisition costs and provide greater convenience.

"Open-air centers are located exactly where traditional and emerging retailers alike want to be—in the backyard of the consumer," said Adam Ifshin, founder and CEO of DLC. "Simply put, they’re great dirt."

"The pendulum of leasing has shifted," added Chris Ressa, EVP and COO at DLC. "The landlord is in the driver’s seat from a deal perspective. A lack of vacancy has created opportunities for re-imagining properties."

DLC is a leading private retail real estate company with expertise in acquisitions, development, architecture, leasing, and management. Headquartered in Metro New York, DLC operates regionally in Atlanta, Buffalo, Chicago, Dallas, and Washington D.C.