Why Are New Strip Malls Being Built All Over New Jersey?
Have you noticed?
New strip malls are being built all over New Jersey, even though there are existing strip malls with plenty of available retail space close by — and in some cases right down the street.
According to real estate expert Jeff Otteau, president of the Otteau Valuation Group, this is happening for a couple of reasons.
When a major retail store wants to establish a presence in a local market, they’ll make a deal with a developer to build a new strip mall, “and then for the developer, the filling in of the additional space in that center really becomes a process of cannibalizing other centers.”
He said smaller stores may decide to move to a new strip mall where a big, in-demand anchor store is opening “because they’ll want to benefit from the traffic in this new store that’s being built.”
“This process of cannibalization creates a viable use of a new center in one place, but actually increases vacancy elsewhere in the process.”
Otteau said big retail stores usually don’t want to move into a vacant space that’s already available, because in most cases, newer is better.
“Typically, those older malls are obsolete in terms of their design and size and, in fact in many cases, it’s cheaper to build new than it is to renovate,” he said.
“Newer strip-mall shopping centers have the benefit of better design, better circulation flows and in many cases better visibility.”
And smaller stores in nearby shopping malls will recognize an opportunity.
“They’ll think: I want to be there, too, because I want the customers at that major chain to have the opportunity to come into my store and spend money.”
Otteau pointed out one major concern over the next several years is demand for retail space is going to continue to diminish.
“We’ve already seen that being driven so far primarily by the increased preference for online shopping by consumers, which reduces the need for physical stores,” he said.
Another concern is a growing trend of consumers ordering online groceries that are delivered right to their doors.
He says most in-demand shopping plazas are anchored by supermarkets, but as the online shopping trend continues, it will likely “remove some of the vitality in those grocery store-anchored centers as well.”