Regional Mall Resilience Post-Pandemic: Navigating Occupancy Trends and Retail Evolution

The retail sector's post-pandemic recovery has been uneven, with regional malls serving as a microcosm of broader shifts in consumer behavior and real estate dynamics. While anchor stores like Rite Aid's Gittings Marketplace closure symbolize the decline of traditional retail models, occupancy trends reveal a bifurcated landscape: resilient malls are thriving through adaptive tenant mixes, while others struggle. This analysis explores how occupancy data and evolving retail strategies shape investment opportunities in real estate.

The Rite Aid Closure: A Microcosm of Structural Shifts

The shuttering of Rite Aid's Gittings Marketplace—a 1.2 million SF mall in Harrisburg, PA—highlights a stark reality. Once a pillar of regional retail, Gittings' reliance on declining anchors (e.g., JCPenney, Sears) left it vulnerable. Its closure reflects a broader trend: malls dependent on single-use formats or outdated tenant mixes face existential risks.

Yet occupancy data tells a more nuanced story. National retail vacancy rates in Q1 2025 dipped to 4.8%, near pre-pandemic lows, driven by necessity-driven sectors like grocery-anchored centers and power centers. Meanwhile, traditional regional malls with declining anchor stores face 5.5% vacancy rates, underscoring the divide between adaptive and stagnant assets.

Occupancy Trends: Winners and Losers by Region

Regional performance varies widely:
- South/Midwest: Markets like Nashville, Raleigh, and Indianapolis boast <3% vacancy, benefiting from population growth and mixed-use developments. Super-regional malls here saw +5.5% valuation gains (Q1 2025 vs. 2024), driven by experiential offerings like dining and entertainment.
- Sun Belt and Western Markets: Fort Worth, Las Vegas, and Phoenix lag, with occupancy 150–200 basis points below pre-pandemic averages, reflecting oversupply and slower economic recovery.
- Northeast: Most markets exceeded pre-pandemic occupancy, except Boston, which remains 10 basis points below its 2015–2019 average.

Tenant Mix Evolution: The Key to Mall Resilience

Malls that have diversified beyond traditional retail are outperforming. Key strategies include:
1. Grocery and Necessity Anchors: Power centers anchored by Walmart, Aldi, or Trader Joe's now command 96% occupancy, as consumers prioritize convenience and affordability.
2. Experiential Retail: Malls adding dining, fitness, and entertainment (e.g., AMC theaters, indoor adventure parks) saw foot traffic rebound to 98% of pre-pandemic levels in Q1 2025.
3. Mixed-Use Developments: Retail spaces integrated with residential or office hubs (e.g., Nashville's Assembly Row) achieved 97% occupancy, leveraging urban density.

In contrast, malls reliant on department stores or single-brand anchors face persistent vacancies. JCPenney's 12.7% CMBS loan delinquency rate and Target's 16.88% non-performing balance exemplify the risks of overexposure to struggling retailers.

Investment Strategies for Real Estate Resilience

The data suggests three actionable themes for investors:

1. Focus on Necessity-Driven Formats

• Power Centers & Grocery-Anchored Malls: These assets have +1.6% quarterly valuation growth (vs. regional malls' -0.3%) and stable demand. Consider REITs like CBL Properties (CBL) or Kimco Realty (Kimco), which dominate this sector.
  Backtest the performance of CBL Properties (CBL) and Kimco Realty (Kimco) when buying on the announcement dates of their quarterly earnings releases, holding for 90 days, from Q1 2021 to Q1 2025.

2. Target High-Growth Regions

• Invest in malls in Sun Belt markets (e.g., Texas, Florida) with 81% of new retail construction in 2024. Properties in Nashville or Raleigh, with sub-3% vacancy, offer growth aligned with population trends.

3. Avoid Overexposure to Legacy Malls

• Steer clear of malls in stagnant regions (e.g., Midwest secondary markets) or those with >5% vacancy. The Gittings closure underscores the risks of anchoring on declining retailers.

Risks and Considerations

• E-Commerce Pressure: Non-store retail grew 8.1% in 2024, but 80% of transactions remain in-store. Investors should prioritize malls with omnichannel synergies (e.g., curbside pickup hubs).
• CMBS Risks: Rising loan delinquencies for retailers like Big Lots (shrinking from 1,400 to 200 stores) could destabilize mall valuations.

Conclusion: Adaptation Defines Survival

The retail recovery is not uniform—it rewards malls that evolve. Occupancy data and tenant mix shifts reveal clear winners: necessity-driven formats, experiential spaces, and Sun Belt hubs. Investors should prioritize resilience through geographic and tenant diversity, avoiding assets tied to outdated models. As consumer preferences solidify around convenience and experience, real estate that adapts will outperform.

In short, the path to retail resilience lies in reinvention—and investors must follow the data to navigate it.