A sale of Marshfield Plaza – and its price – could provide additional clues about the state of the mall investment market. Malls suffered early in the COVID-19 pandemic as retailers closed stores and stopped paying rent. As consumers spent more money online and shunned physical stores, the most pessimistic prognosticators were predicting that the dreaded retail apocalypse had finally arrived. With few investors willing to bet on the sector’s future, shopping center sales have plunged.
But the sector, like the broader commercial real estate market, has rebounded over the past year. Malls, especially those with grocery stores and other retailers less vulnerable to e-commerce competition, posted strong sales increases.
“21’s unprecedented brick-and-mortar sales growth, which outpaced e-commerce sales growth for the first time ever, boosted investor confidence in the shopping center industry and helped drive up asset values. . . to new all-time highs,” Green Street, a California-based research firm, wrote in a recent report.
Marshfield Plaza includes a Jewel-Osco grocery store and drugstore which is separately owned and not part of the sale. The property also included a Target store which closed in 2018. A Chicago investment firm, DL3 Realty, bought the store and converted it into a Blue Cross & Blue Shield community center and office, selling the property for $20 million to a New York investor. year.
Although Jewel-Osco and Blue Cross do not pay rent to PGIM, their presence is a plus for investors as they attract visitors who often shop at nearby stores.
A representative for PGIM did not respond to a request for comment.
The city’s major malls don’t trade very often, but a few sold out last year. In June, a California investment firm, NewMark Merrill, paid $36 million, or $117 per square foot, for Bricktown Square, a 292,300 square foot property on the city’s West Side. Also in June, Dallas-based Tabani Group paid $30.5 million, or $173 per square foot, for Chatham Ridge Mall, a 175,800-square-foot property in Chatham, South.
Green Street estimates U.S. mall values rose about 30% in 2021 after falling 12% in 2020. But investors preferred properties in fast-growing Sun Belt markets to those in markets like Chicago. Indeed, Chicago ranks 38th in a Green Street growth forecast for 50 major US metropolitan areas.
Green Street and investors differentiate malls from malls, the much larger properties often anchored by multiple department stores. Because department stores continue to struggle and e-commerce competition has hurt many mall tenants, malls have not recovered as quickly and face a less certain outlook.
Although Marshfield Plaza lost a Marshall store, DD took over the retailer’s 16,000 square foot space last year. The property is approximately 95% occupied.
Marshfield Plaza also comes with some goodies for a future owner. The city subsidized construction of the mall with additional tax financing, and CBRE estimates a buyer could pocket about $9.5 million in TIF funds in the future, payments that should increase the value of the property.