The Short Version

• Landlords aiming for full occupancy are turning to community-serving services tenants like tutoring centers, salons and tax preparers.
• At Canton Marketplace in Georgia, a service-heavy tenant mix helped boost occupancy from 88% to 99%.
• Tenants like nail salons and pet services are drawing loyal customers.
• Developers are choosing to retain long-established local services tenants rather than replacing them with trendier concepts, according to one broker.
• Services tenants often pay lower rents but can succeed in less-prominent locations.

Why Unsung Services Tenants Are Key To Reaching 100% Retail Occupancy

Newer, sexier uses like cold-plunge centers or Wegovy-based weight-loss clinics may be tempting to landlords and brokers working toward 100% occupancy, but community-oriented mainstays can do a lot of heavy-lifting as well, from tax prep to tutoring to trims.

A Leasing Strategy That Adds Stickiness and Dwell Time

Today, 17 of the 48 tenants in Georgia’s Canton Marketplace offer either pure service or a hybrid of services and retail products, and it is 99% occupied. The service-oriented leasing strategy “filled a need for the community and greatly added to the reasons to shop our center,” said Retail Specialists executive vice president Bill Read. “It also created longer dwell times at the property.”

Foot Solutions is one such hybrid service provider and seller of goods that has a location at the property. Its board-certified Pedorthists recommend and sell specific orthotics and footwear based on personalized exams and tech-assisted analyses. “It is really there as a service provider,” explained Read. “They provide something that you cannot get at a normal shoe store.”

When Acadia acquired Georgia’s Canton Marketplace in August 2021, the 352,000-square-foot power center was 88% occupied. “It had several vacancies, mainly in a wing away from most of the anchor retailers,” noted Read, who worked with Acadia vice president of leasing Danny Annibale to lease up the property. “[We] set out to fill these spaces with retailers that provided services and had high touch points with our existing customers.”

In addition to Foot Solutions, Canton Marketplace’s roster also Deka Lash, which both employs “lash artists” and sells high-end products; Claire’s, which sells accessories and offers piercing services; and PetSmart, which sells pet-related goods and offers grooming, training and adoptions. Other service-oriented tenants at the property include The Joint Chiropractic, PT Solutions Physical Therapy, Rio Body Wax, Club Pilates, StretchLab, Sport Clips, Massage Envy and Sola Salons, which rents hair studios to independent stylists.

How Pet Care, Nail Salons and Lash Studios Are Expanding Footprints

Service tenants form an important component in the leasing strategy for Westwood Financial’s more than 125 shopping centers in U.S. metro markets, said national leasing director Katherine Allen. Those services include haircuts by Great Clips, hair-removal by European Wax Center and tax prep by H&R Block, Liberty Tax and Jackson Hewitt. “These are services that create healthy foot traffic and, when people are finished with their appointments, cross-shopping,” Allen said. “They meet the needs of your everyday community and create loyal consumers. They also co-locate well with grocers and drugstores.”

Over the years, nail salons have ramped up their services and started leasing much bigger spaces, Read said. At Canton Marketplace, for example, Serenity Nails occupies 3,500 square feet and offers manicures, pedicures, facials, waxing and eyelash treatments. “It used to be that every shopping center had about a 1,200-square-foot nail salon,” Read said. “Now, they’re all wanting 3,500 to greater than 5,000 square feet.”

The pet category, in particular, draws devoted customers, not the least because of the services the businesses offer, including veterinary care, training, grooming, boarding and washing. The growth of tenants like Pet Supplies Plus, Dog Training Elite, Dogtopia, Camp Bow Wow, Petfolk and Woof Gang Bakery & Grooming owes in part to the uptick in COVID-era pet ownership, Allen said. “In suburban shopping centers and mixed-use projects, we will continue to see a lot of growth in the pet area,” she said. “With that, you end up with a sticky customer base that keeps coming back. It takes a high degree of trust, and so pet parents, so to speak, become really loyal.”

ALSO CHECK OUT: Retail Centers Go Dog-Friendly and Shoppers Are Following

The Case for Retaining Longtime Community-Serving Tenants

Both existing service tenants and the potential to lease to new ones can be attractive to developers that aim to acquire and reposition grocery-anchored shopping centers, said Mountain West Commercial Real Estate partner Lance Pendleton. He cited Asana Partners’ 2021 acquisition of the 270,000-square-foot Foothill Village, a two-level shopping center in Salt Lake City for which Mountain West is handling leasing. “They loved the activation and visits you had with UPS Store being located in that section of the shopping center,” said Pendleton. “We are putting a strong focus and emphasis on getting the UPS Stores of the world into our centers.”

Exterior renovations to the 67-year-old property will finish this fall. The work includes creating community gathering places; improving pedestrian flow; upgrading facades, signage and wayfinding; and carving up a former Stein Mart box for smaller retail spaces.

In addition to The UPS Store, the property’s service-oriented lineup includes Get Nails Salon, Zions Bank, CorePower Yoga, Face Foundrié, Great Clips, Portica Body & Face, Kumon math and reading educational center, K Studio Salon, H2blow blow-dry and beauty bar and Ignition Consulting Group, which aids in business management. New retail, wellness and restaurant offerings coming this year and next include JD Flannel doughnuts and coffee, Solidcore fitness, Mara shop and studio, and a national Pilates studio, according to Asana.

After acquiring such properties, many landlords typically might have replaced older service tenants with higher-paying, newer, sexier uses, but Pendleton said today’s owners are more likely to keep such bread-and-butter tenants, though they might relocate such tenants to other spaces at the centers. “Whether you’re talking about jewelry repair or the tailors of the world, they appreciate that these are businesses that have had a working relationship with that community for 20 or 30 years,” he said.

ALSO CHECK OUT: This Property Doubled NOI by Focusing on Health, Wellness, Fitness and F&B

How Community-Needs Services Tenants Fit Into Pro Formas and Floor Plans

Landlords do need to consider that while service tenants bring benefits, they often require lower rental rates. At one well-located Salt Lake City shopping center, Pendleton said, food-and-beverage and soft goods tenants drive triple-net rents from $55 to $60 per square foot. By comparison, service-oriented retailers at that property tend to be able to pay $42 to $45 per foot. “Fortunately, [service tenants] can find opportunities on the second level where they can get $10 or $15 off per square foot versus a first-floor location.”

This less prominent location within a property can work because visibility and centrality tend to be less important for service tenants that already boast strong community connections, he explained. “Some of these service-oriented retailers like UPS Store would never go on the second level, but a tax prep or tutoring company would,” Pendleton said. “There are categories that fit that second floor and/or more destination-type suites within a shopping center. They are filling a need within our rent rolls to get some of these centers to 100% leasing.”

Nonetheless, some developers tend apply the same lease rates across their pro formas, rather than making adjustments for the differing needs of small-shop service operators. “We are trying to consciously make sure that our landlord’s pro forma pencils with three or four of these other service-oriented retailers,” Pendleton said.

More From C+CT and the ICSC Small Business Center

Phenix Salon Suites’ Expansion
Nurse-Staffed Ear Piercing Studio Rowan
What It Takes: Launching a Pilates Studio
A Joint Chiropractic Franchisee Explains Why She Chose Franchising