The rise in popularity of the outdoor shopping mall has been building consistently over the last decade or so, and the aftermath of the Covid-19 pandemic further solidified its position at the top.
As the world began to go out again, many were still cautious, opting for open spaces. Thus, outdoor shopping malls had the upper hand in recovering from the pandemic because people felt safer venturing out in the open air versus an indoor mall.
Outdoor retail has inherent appeal – especially with Los Angeles’ climate – which helps set up these centers for success, although it isn’t guaranteed.
If a shopping center becomes outdated and doesn’t have the right mix of “modern, relevant” tenants in terms of retail but also experiential and dining, Meghann Martindale, a retail professional at Avison Young, said their fate can be doomed.
“It’s not just about driving foot traffic and visits. It’s also about building that loyalty and that frequency,” Martindale said, especially in a competitive retail giant like Los Angeles.
Caruso and Westfield
To properly examine outdoor retail, Martindale sees two types: first, centers where there’s one owner and developer executing a unified vision and second, the “organic street environment.”
Each has its own set of strengths. For that first category, the consumer gets to immerse themselves in what feels like a carefully constructed atmosphere.
“These are master planned and merchandised. Every little detail has been curated down to music playing and what the grass looks like,” Martindale said.
Two prominent developers under this category are Caruso, the developer of The Grove LA, The Americana at Brand, The Commons at Calabasas and more, and Westfield Group.
Given its massive, global portfolio, it’s more than fair to say Westfield is successful and this holds true in the Los Angeles market with its properties in Century City, Culver City and Sherman Oaks.
Where Martindale argues that Rick Caruso, founder and executive chair of Caruso, has the edge is in curating his entire approach to Los Angeles.
“Caruso is L.A. He knows this landscape like the back of his hand… He really was able to see a void in the market on all of his projects and create that sense of community around it and then execute it in a hyper detailed (manner),” Martindale said.
This tracks as The Grove, The Americana and The Commons all have 100% occupancy.
While Westfield does tailor its formula market-to-market, “it’s just different when it’s highly corporate and globally run,” Martindale said.
Even still, she gives credit to Westfield Century City in its efforts to stay current and appeal to the local consumer. This includes immersive experiences such as The Minecraft Movie Experience and the upcoming Pop Mart X TikTok Super Brand Day.
Overall, the way Martindale sees it is if the goal is to shop, Westfield Century City may be the choice, but if the goal is to have an experience, go to The Grove.
The street-oriented outdoor retail space can make achieving a cohesive environment challenging but can create a unique feel difficult to replicate when executed properly.
Take Abbot Kinney Boulevard in Venice. Part of its appeal has stemmed from the area’s ability to maintain the “cool factor,” Martindale said, even despite having a multi-landlord structure. The street has had a history of turning away more mainstream retailers including Apple Inc. opting for more niche companies which has allowed them to attract unique and international brands.
Rents and foot traffic for the area keep going up and vacancy remains low, according to Martindale who said the area is “on every retailer’s radar.”
There was once a time, however, when Abbot Kinney wasn’t all all that, according to Martindale, who recalled when Third Street Promenade in Santa Monica reigned retail supreme.
This feels like a distant memory given Third Street’s 21.4% vacancy rate, as of May.
“The Promenade has really declined and seen a lot of store closures… It’s just lost its luster for a lot of the retailers,” Martindale said.
Prior to the pandemic, the Promenade had begun to have some of the highest retail rents in L.A., Martindale said. Given the area’s inability to recover since the pandemic and considering it had been waning in popularity even before that, Martindale argued that the Promenade should reimagine its incentives, both to retailers and customers.
Part of this means potentially offering new tenants one- or two-year discounted rents to attract retailers. Even if this produces lower margins than a typical lease, Martindale said it’s “better than a vacancy for three years.”
“It’s hard to get people to swallow this sometimes, but I think you really have to price the real estate right to get retailers to come back in… You have to almost give away some deals to get the right tenants,” she said.
Wick Zimmerman, chief executive of a design-build specialty construction company Outside the Lines Inc., also said tweaking the Promenade’s view of monetary gains from short term to long term could mitigate some of the strip’s challenges.
He finds that the Promenade has been overlooking the big picture, shying away from some entertainment elements that wouldn’t necessarily drive revenue but that would drive foot traffic.
“Even if the experiential piece is not generating a lot of revenue… it gets people there and it keeps people there,” Zimmerman said. “…And the longer a shopper stays at a facility, the more money they spend.”
Indoor, on the other hand, remains challenged
Indoor shopping malls must work much harder to maintain a place in today’s retail landscape. In Los Angeles, this is particularly important as the promise of annual, walkable temperatures lures consumers to outdoor retail.
Starting about 15 years ago, the tried-and-true formula indoor malls clung to – a department store anchor tenant, an array of quick-grab food options, a movie theater and some supplemental retailers – stopped being enough.
“We had these very specific subscriptions to how we looked at the categories of retail, and that really started to shift, certainly with online, but also just bringing in new uses that 20 years ago, we would have never done in a shopping center,” said Martindale, of Avison Young.
These include gyms, upscale grocery stores, entertainment beyond movie theaters, digitally native brand pop ups and more formal dining.
As consumer buying habits began to shift, there became a decreased interest in the major department stores like Macy’s and more of a pull toward smaller, local boutiques, said Wick Zimmerman, chief executive of Outside the Lines Inc.
This created fundamental structural challenges for indoor malls who were left with huge vacant store spaces. From 2015 to now, overall vacancy rates for indoor malls in Los Angeles have more than doubled, according to Avison Young.
Because of online shopping, the heavy reliance on retail-specific tenants also shrank as people moved further into viewing shopping as an activity versus an errand.
In light of this, Zimmerman said experiential tenants and pop-ups became a major draw for people. He first observed this shift following the 2008 recession, arguing that after this period ended, people needed to be pulled back into retail centers for reasons other than traditional shopping.
Also eyeing Covid-19 as a turning point for retail, Zimmerman said this concept was reinforced even further following the pandemic, he said.
“It seemed like retail was going to go down the tube because everybody was sitting at home and ordering everything online,” Zimmerman said. “What that did was create this incredible pent-up demand where all of us wanted to go out and do something.”
Thus, experiential elements were no longer a bonus but an expectation from consumers, he said.
One local indoor mall that has been able to reinvent itself is Beverly Center, which after a $500 million renovation project in 2018, incorporated aesthetic and entertainment upgrades.
This included replacing a significant portion of the roof with skylights and swapping many walls for ceiling-to-floor windows. The developers of Beverly Center also added air wells to walkways and an additional entrance on Third Street – all in an effort to align its experience more with the airy and bright atmosphere outdoor centers are able to provide
“They’re the perfect example of staying relevant and responding to the shift in how consumers are shopping,” Martindale said, calling the center the “dominant powerhouse of luxury.”
Beverly Center also revamped its restaurant offerings, incorporated art installations and virtual reality experiences, added a fitness center and Lucky Strike, and began putting on seasonal fashion shows.
Martindale stressed that a mall’s ability to pull something like this off comes down to access to funding. The Taubman Company, which owns Beverly Center, was able to foot the bill.
“There’s a lot that goes into that from an investment and capital standpoint and… whether an owner of a mall has the capital to keep relevant is a big piece,” she said. “It doesn’t happen for free.”
Los Cerritos Center, which implemented a very similar strategy as Beverly Center, is another revitalization success, said Vicky Hammond, a managing principal at Coreland Companies.
“Indoor malls have become somewhat a thing of the past, but part of the problem is that we’ve largely been over retailed… But there is a good handful, like Los Cerritos, who have done a really nice job of investing and redeveloping aspects of them,” Hammond said.
Moving over to the valley, the proximity between the Glendale Galleria and The Americana at Brand brings the indoor versus outdoor retail battle to a head.
While Martindale said the Glendale Galleria has not done as much as the Beverly Center in the way of renovation and new tenants, they continue to be “a solid mall operator.”
She attributes part of this to Glendale’s demographic tilt toward shopping and having disposable income and this being the most traditional mall in that area. The mall has seen some updates and there are a few new tenants in recent years, though it still lacks an “it factor,” Martindale said.
“When The Americana opened, it took some of the cool factor and the luxury aspect, but the Galleria (is geared) more toward commodity shopping,” Martindale said, adding that it is still “a top-notch mainstream mall.”
When a similar competition landscape arose in Torrance, the indoor mall didn’t fare as well.
Del Amo Fashion Center’s 2015 renovation and reopening turned the South Bay Galleria on its head. With redevelopment plans for South Bay Galleria seeing continuous delays over the last decade, which was exacerbated by the pandemic and the following high-interest rate environment, the road to recovery has not yet been attainable.
The Puente Hills Mall has a similar story.
“It was a sad, sad day walking through that mall, because that whole area is a powerhouse for retail, and then there’s this sad, dead mall in the middle of it,” Martindale said, remembering her recent visit to the mall.
About a year ago, JLL Capital Markets secured a $115 million acquisition loan for the City of Industry mall as part of a renovation push, though no announcements have been made since.
For indoor malls struggling to maintain occupancy, Hammond suggests opening spaces up to schools, universities or local organizations for events or practice spaces.
“It can be a fantastic addition, and you can continue to run a mall in a safe manner – it’s just not going to look like traditional retail,” she said.
Grocery-anchored centers depend on brand
The first widely recognized grocery store in the U.S. appeared in 1930, changing the landscape of what used to be a collection of specific markets to one supermarket.
For nearly a century, a trip to the grocery has had many faces, adapting to changes in consumer behavior, weaving in experiential elements and spinning into high-end, specialty and discount models.
Now, in the Los Angeles retail landscape which has been struggling with vacancies, experts in the field see grocery-anchored retail centers as the darlings of the sector – though specific strategies must be deployed to ensure success.
The Covid-19 pandemic helped to establish this, as it created the distinction between necessity retail and non-necessity retail, said Jim Dillavou, principal and co-founder of Paragon Commercial Group in El Segundo.
Between 2020 and 2025, grocery-anchored retail centers have remained in the 95-97% occupancy range, according to Avison Young.
“Grocery sales went up… and that really proved our thesis that the location of our centers next to neighborhoods and the type of tenants we put in those centers, which is a necessity-type tenant, is not only durable, but also in the government’s eyes critical to society and to communities,” Dillavou said.
Issues of personal preferences arose, as online grocery orders gained popularity amid the pandemic. Dillavou calls this the “banana problem” – i.e. when the consumer’s grocery delivery shopper picks all green bananas when the consumer wanted yellow. People remained fond of the time-saving aspect of online orders but were inclined to personally inspect what they were paying for, prompting the rise of pick-up orders.
“Now we’re in this world of ‘the click and collect’ … this hybrid model that has emerged,” Dillavou said. This allows the consumer to place their grocery orders online, pick them up and be able to swap out produce if they so choose.
This has impacted the configuration of grocery-anchored centers’ parking structures, Dillavou said, with grocers opting for increased temporary parking spots for those picking up. Additionally, it created a need for less physical space within the stores.
In the 1970s and 1980s, grocery stores were around 55,000 to 60,000 square feet, he said. Now, they are between 25,000 and 40,000 square feet.
The onset of specialty grocers also contributed to the changing spatial needs of grocery stores, Lea Clay Park, co-founder and partner at Axiom Retail Advisors based in Irvine, said.
“The biggest trend over the last 20 years has been the rise of the specialty grocer,” Park said, calling out Sprouts Farmers Market and Trader Joe’s, as well as discounters like Grocery Outlet and Food 4 Less.
The Kroger Cos. of the world are getting hit on both sides – losing business from some demographics based on more competitive pricing elsewhere as well as other demographics looking for more desirable products.
Now people are only going to the large-scale supermarkets for what Park calls “middle of the store items” like ketchup, beans and pasta—the products that typically don’t yield the highest margins.
“For a while, grocery stores were getting bigger and bigger and bigger and trying to be all things to all people but now you’re starting to see them shrink again,” Park said, adding that a Trader Joe’s with 14,000 square feet of space often doubles, or even triples, the sales volume of a conventional grocer that has three times the physical footprint.
Specialty grocers also attract foot traffic to other tenants within a grocery-anchored center, allow owners to charge higher rents and attract more diverse customer bases, Park said.
The success of these grocery-anchored centers, however, is tied with their ability to fit in with the fabric of their community. This includes which stores to place in general and how to differentiate the same store to separate communities.
“If you put a Target in West Hollywood, in Westchester and in Carson, those need to be merchandised differently based on the consumer,” Dillavou said. “You can’t put the same things in all of those stores because they won’t sell the same. The ability to locally merchandise within L.A. is critical.”
Additionally, Dillavou pointed to incorporating ethnic grocers in centers based on demographic data such as placing Vallarta Supermarkets in Latino-heavy neighborhoods.
Martindale echoed the importance of digging into demographics especially in somewhere as diverse as Los Angeles.
“It’s demographics first by far, and then it’s looking at the competition to understand what sort of voids you’re filling,” Martindale said. For example, while a Vons may be perfect on paper for a certain neighborhood, if the area already has a Ralphs, then it may not prove successful.
This in part is creating a new trend of co-grocery anchors, Park said, pointing to a center in Encinitas with both a Ralphs and Trader Joe’s and the USC Village which has Trader Joe’s and Target Corp. Most people go to a handful of grocery stores because not every store has everything, but this helps bridge that.
Inversely, Dillavou found that in opening a Sprouts-anchored center in Studio City where they had been a bit of a hole in the market, demand outpaced parking supply and he was forced to add valet options and hire a parking attendant to manage.
How an owner or developer selects co-tenants is also key. The grocery anchor sets the tone for other tenants in the sense that you’re probably not going to put a Lululemon next to a Grocery Outlet, Park said.
Runway Playa Vista, a center anchored by Whole Foods, exemplifies this. In line with a consumer shopping at a high-end grocer like Whole Foods, the center has a Jeni’s Splendid Ice Creams store, an Orangetheory Fitness and a Modern Animal – all upscale takes on their traditional business segments.
Runway also benefits from its built-in multifamily complex creating automatic customers for the retail center’s tenants.
Martindale acknowledged the obvious benefit of having a built-in customer base through this model though she says challenges arise with “layout and functionality.” To be successful, the center must be easily accessible to the general public in addition to the multifamily renters.
In examining Los Angeles’ grocery retail scene it would be remiss to overlook Erewhon Market, which has taken the high-end grocery concept to entirely new heights.
“Erewhon is the most interesting tenant in the business right now,” Dillavou said. “They’ve taken grocery and made it interesting by mixing groceries and entertainment.”
Drawing in customers through viral smoothies and outlandishly priced strawberries, people are drawn to experiencing the hype.
“They’ve tapped into something about today’s youthful consumer that nobody else has been able to tap into, and they have the cult following as a result of that,” Dillavou said, adding that having Erewhon as an anchor tenant “guarantees foot traffic.”
Similarly, Park argued that Erewhon is “in a league all by itself,” while Martindale views Erewhon more as a competitor to restaurants than other grocery stores.
Just like the other grocery stores, properly merchandising a center anchored by Erewhon takes knowing the consumer.
“It’s targeting the mom who stepped out in Lululemon, driving the Range Rover, or it’s the young up and coming professional climbing the corporate ladder,” Martindale said, adding that there needs to be fitness tenants, salons and gourmet eats.
The Summit at Calabasas seems to have taken notes offering Rose’s Garden Bar, Cienega Med Spa, Salon Nuuvo, Vitality Personal Training and more.
Whether it’s Erewhon, Trader Joes, Sprouts or Grocery Outlet, “this asset class is having its day in the sun right now,” Dillavou said.
Part of this is due to current interest rates and construction costs halting construction and therefore limiting the onset of additional competition.
“What already exists (in the grocery-anchored market) continues to become more and more valuable … (because) construction costs, labor costs, product costs, inflation are all conspiring to make it incredibly difficult to build a grocery store from the ground up. I mean, it’s next to impossible,” Park said.
Grocery-anchored centers typically have lower occupancy costs and higher sales than other retail assets like shopping malls. Even still, grocery-anchored retail rents are at historic highs in their own right and Park doesn’t see that changing any time soon.
