The country’s biggest open-air shopping center landlords reported strong leasing activity in the fourth quarter, despite COVID-19’s effects on store traffic and retail sales.

Kimco Realty executed 92 new leases totaling 406,000 square feet, more square feet than in the fourth quarter of 2019. New leasing rates increased by 6.8 percent year over year. The company’s big boxes are in high demand from grocery, off-price, home goods, home improvement, furniture, health, wellness, medical and beauty tenants, CEO Conor Flynn said on an earnings call. “Interesting to note, we are starting to experience a rebound in both restaurant demand and value fitness retailers.”

Federal signed 103 retail leases for 469,000 square feet in the fourth quarter. Its properties are benefiting from a tenant migration to the suburbs, said executive vice president and CFO Dan Guglielmone. “First, urban and CBD tenants are migrating to top-tier, first-ring suburban assets. Second, top-tier tenants [are] upgrading their real estate to the best-in-market open-air locations. And third, new-to-market lifestyle and digitally native tenants [are] targeting our open-air, mixed-use and lifestyle properties.”

Retailers seeking off-mall convenience helped fuel an increase in tenants at Brixmor’s open-air properties, as well, said president and CEO James Taylor. “Mall-native tenants such as Bath & Body, Foot Locker, Kay Jewelers, Sleep Number and Visionworks are increasingly relocating from malls to our open-air centers.” In the fourth quarter, Brixmor signed 1.4 million square feet of new and renewal leases with grocery, home improvement, value, service and quick-service restaurant tenants. The company achieved 22 percent increases on new lease rates during the quarter.

The best-in-class tenants are looking at their real estate differently, Flynn said. “In many cases, their real estate team is now integrated into the entire supply chain. Distribution, fulfillment, e-commerce and store decisions are all integrated on how to best service the customer. The store, which is optimized for distribution and fulfillment, continues to shine as the most economical way to get goods and services into customers’ hands.”

Vacancy means opportunity

Small-shop leasing is getting a boost from tenants testing out new businesses, said Kimco Realty executive vice president and COO David Jamieson. “What you are seeing is operators, entrepreneurs, restaurateurs seeing the vacancy within high-quality portfolios in the near-term as a way in which to either expand their existing operation or get into markets that they otherwise were challenged to do so,” he said on an earnings call.

In many cases, new tenants are more nimble than existing tenants that are struggling to adapt to the post-pandemic market, said Federal CEO Don Wood. “It is sometimes much harder to be a legacy business than a new business coming in. What you will see is businesses coming in with a lower cost basis to start versus their existing legacy competitors.”

Kimco CEO Flynn says value-oriented fitness operators like Planet Fitness and Crunch are seeking space vacated by other chains to enter markets or centers previously unavailable to them. “The price point that they’re servicing and providing is probably appropriate coming out of the pandemic to start,” he said.

Less restrictions, more leasing

Leasing activity is busiest where government restrictions are lowest, said Regency Centers executive vice president and COO Jim Thompson. Regency Centers is signing shorter leases in order to save space for better tenants later, he said. “We’re being thoughtful when making leasing decisions, with an eye towards longer term. We believe that rents for much of this space will return to higher levels post pandemic and by signing shorter-term deals, we’ll have another bite at the apple in the near future.”

6 retailer updates

• The pandemic won’t kill Century 21 after all. The discount department store, which liquidated its operations and closed all 13 stores last year, plans to open a store in Busan, South Korea, this year. A return to New York City could be in the future, as well.

• Foot Locker earmarked $275 million for capital expenditures in 2021, including upgrading existing stores and opening more “community-based, off-mall stores.”

• On Wednesday, P&G opened the first stand-alone barbershop for men’s grooming brand Old Spice. The shop, designed to double as a content studio where celebrity guests and influencers can generate grooming-related videos to share with their followers, is on the main retail street near Columbus Ohio’s Ohio State University.

• Batteries Plus Bulbs already has opened 10 stores in 2021 and plans to open at least another 30 before year’s end.

• When supermarket chain Giant’s 65,000-square-foot, two-level flagship in Philadelphia’s Center City mixed-use district opens next month, it will feature a pickup station for online orders, a food hall and a beer garden.

• Private equity firm LGP plans an IPO for fabric and crafts retailer Joann, hoping to capitalize on homebound consumers’ increasing interest in crafts and to raise as much as $400 million.

This time last year

It’s been a long 525,600 minutes, but open-air centers are still the favorable property type. Compare coverage of Q4 2020 earnings from the top of this article with coverage of Q4 2019 earnings below. Plus more from this week last year:

Open-air REITs overcame small-shop vacancy challenges in 2019
Open-air REITs offload noncore properties in 2019
Food services play key role in shopper experience: Report
Why Lands’ End, Pier 1, Showfields, The Body Shop and more are making headlines
Who's building what, where

Résumé updates

Federal promoted Jeff Berkes to the new role of president and COO. He will manage day-to-day functions like leasing, development and asset management on both coasts. Berkes will work with eastern region president Wendy Seher and Jan Sweetnam, who has been promoted to western region president. Berkes served as chief investment officer from 2000 through 2010 and since then as western region president. Federal also promoted Barry Carty to senior vice president of East Coast acquisitions, Lance Billingsley to senior vice president of anchor leasing, Kari Glinski to vice president of asset management for the metropolitan Philadelphia region and Michael Papillon to vice president of asset management for Maryland.

The latest retail property deals

Orion Real Estate Group sold a 134,851-square-foot portfolio of single-tenant, net leased retail assets — six CVS Pharmacy stores, one Walgreens and three Tractor Supply Co. stores — to L2 Partners, a private equity group represented by SRS National Net Lease Group. It was a $33 million, off-market, cash deal. The portfolio spans Alabama, Florida, Georgia, Indiana, Michigan, Ohio, Tennessee and Texas.

Benderson Development paid $16.4 million for a 128,715-square-foot, single-tenant retail building in Bloomfield, New Jersey, triple-net leased to The Home Depot on a long-term basis. JLL represented the seller, Acadia Realty Trust.

Slate Asset Management purchased the 78,520-square-foot, Harris Teeter-anchored Tanglewood Commons in Clemmons, North Carolina, for $15 million from Phillips Edison & Co. Tenants include Great Clips, Novant Health, Papa John’s, Petsense and Subway.

NewStreet Properties sold the 100,000-square-foot 72nd Crossing shopping center in Omaha, Nebraska, to LVP Center for $12.75 million. Tenants include Big Lots, Dunkin’, Michaels and PetSmart.

Shrisha LLC sold the 15,938-square-foot Shops at Tuscano in Phoenix to TDN Properties for $5.2 million. Sprint/T-Mobile, Little Caesars and TitleMax are tenants. Newmark represented the seller.

Plainfield, Indiana’s 26,000-square-foot Stafford Crossing traded for $4.9 million. The anchor tenant, Chicago’s Pizza, recently executed a long-term lease extension. Stan Johnson Co. represented the seller, a local developer. The buyer was an Indiana-based 1031 exchange investor purchasing several properties in the area.

The 40,390-square-foot Humboldt Square Shopping Center in Brooklyn Center, Minnesota, sold for $3.75 million. Dollar Tree and New Horizon Academy anchor the center. KW Commercial represented the seller, Kensington Property Management, and secured the buyer, Thomas Kite.

Thompson Thrift sold the 9,800-square-foot Shops at Mattoon Marketplace, pictured at top, in Mattoon, Illinois, for $3.7 million. Tenants include AT&T, Great Clips, Jersey Mike’s, OSF Healthcare and Starbucks. Mid-America Real Estate Corp. represented the seller, and Faris Lee Investments represented the buyer.

Benderson Development purchased the 34,087-square-foot, Publix-anchored North Delray Commons, in Delray Beach, Florida. Marcus & Millichap Institutional Property Advisors represented the seller, an institutional investor. Tenants include AT&T, Jersey Mike’s, Lina Nails and The UPS Store.