Regional Malls, Shopping Centers Dominate Q4 REIT Returns

Mall, shopping centers and outlet REITs closed 2022 on a strong upswing and dominated S&P Global’s Q4 list of top-performing REITs ranked by fourth-quarter returns.

Near the top of the leaderboard were regional mall REITs Macerich, which ranked second with a Q4 return of 43.9%, a tick behind Service Properties Trust—a hotel REIT that was the top performer with a 44.2% quarterly return—and Simon Property Group, which notched a 32.9% return in Q4 as the REIT with the fifth-best quarterly performance.

Rounding out the 10 top-performing REITs in the fourth quarter were RPT Realty, a shopping center REIT (34.5%); Tanger Factory Outlet Centers (32.8%); SITE Centers, a shopping center REIT (28.8%); and Brixmor Property Group, also a shopping center REIT (24.6%).

Regional malls were the top-performing sector in the Q4 2022 Dow Jones US Real Estate property sector index total return comparison at 32.8%; followed by retail in general at 18.4%; strip malls at 14.1%; and industrial at 11%.

A good example of the resurgence of malls in 2022—and a successful strategic adjustment that anticipated a post-pandemic market craving experiential shopping experiences—can be found at Chattanooga-based CBL Properties.

CBL, the owner of a portfolio of 94 malls, outlets and lifestyle centers encompassing more than 58M SF—which emerged from bankruptcy in a chapter 11 financial restructuring at the end of 2021—has rebounded with a banner year in 2022.

The mall owner leased more than 1M SF of retail space for the year, drawing new tenants to malls that are thriving in mid-level markets spread out in a portfolio that stretches from North Dakota and Wisconsin to Tennessee, according to a report in Chain Store Age.

According to CEO Stephen Lebovitz, leasing demand for CBL properties has been above pre-pandemic levels, resulting in a 200 bps increase in portfolio occupancy in 2022. Lebovitz said the portfolio had signed what he called an “exceptional” number of new store openings, including boutique retailers and artisan food shops.

CBL emerged from Chapter 11 in November 2021 after a restructuring that resulted in new terms with lenders that eliminated more than $1.6B in debt from the mall owner’s balance sheet.

CBL signed 10 new tenants at Kirkwood Mall in Bismarck, ND and signed Scheel Sporting Goods and a Tilt entertainment center at the Dakota Square mall in Minot, ND. Hamilton Place, in Chattanooga and Westmoreland Mall, located in Greensburg, PA each signed five new tenants, CSA reported.

CBL has benefited greatly from pre-pandemic investments in experiential anchors at its malls—including locations that have casinos as anchor tenants and other entertainment-oriented, experiential magnets that are now the most successful models for mall strategies. In 2020, CBL opened a Live!Casino at Westmoreland Mall; in 2022, the company opened a Hollywood Casino at York Galleria.

“It was a bold move, and one we had reservations about initially. Not anymore. Both malls have extended their market share and traffic has continued to increase double digits,” Lebovitz told CSA.