Celebrity-backed brands will be an important source of rental income for landlords in coming years, as many mature from online to physical stores in an effort to grow sales, according to new report from JLL. In the past decade, celebrity-backed retail brands have taken up more than 300,000 square feet in the U.S., and the trend is accelerating, the firm said.

Actors and musicians are the most common celebrity types to embark on retail ventures. Rihanna’s Savage X Fenty lingerie brand has opened five physical stores since 2022. Now, reality TV star Kim Kardashian’s Skims will open its first permanent store, a 5,000-square-foot streetfront space in Los Angeles, in the first half of 2024. A store in New York City and a smattering of units in tourist-centric markets across the country will follow. The success of such brands has more celebrities jumping on the bandwagon. There’s even a venture capital firm that specializes in funding the incubation of celebrity brands.

While many launch beauty product lines, the celebrity brands that are more likely to open physical stores are those that sell apparel, according to JLL. Malls are the most popular location for celebrity-backed brands, 76% of which have opened in such properties. Most opt for a mixture of mall and street retail, in addition to some hospitality locations in the form of Las Vegas casinos. Many look to the coasts, according to JLL. Celebrity brands prefer to generate buzz and test consumer tastes with pop-ups in New York City, while Los Angeles was the top market for celebrity brands opening their first permanent stores.

A host of celebrity-backed beauty brands are still in the e-commerce and retail partnerships phases of their growth, according to JLL, including model Cindy Crawford’s Meaningful Beauty and actress Millie Bobby Brown’s Florence by Mills. Though they don’t yet have their own locations, they’re sold at Ulta Beauty stores.

Others are experimenting with physical pop-ups like model Gigi Hadid’s Guest in Residence cashmere brand and singer Justin Bieber’s Drew House. Meanwhile, only 11% of celebrity brands have opened brick-and-mortar stores thus far, including actress Sarah Jessica Parker with SJP, musician Drake with October’s Very Own, actress Gwyneth Paltrow with Goop, musician Pharrell with Billionaire Boys Club and actress Reese Witherspoon with Draper James. That leaves a lot of room for potential growth.

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Rent Hikes in Q2

The availability of retail space in the U.S. hit a record low of 4.8% in the second quarter, helping push the average asking rent up by 0.6% from the first quarter to the second, to $23.21 per square foot, according to CBRE. That’s the highest quarter-over-quarter increase since the first quarter of 2022. On a year-over-year basis, average asking rent grew 2.1%. The neighborhood, community and strip center category had the largest year-over-year gain, at 2.7%.

Southeastern states posted the biggest gains. Raleigh, North Carolina, led the nation with a 4.4% quarterly increase, to $20.57 per square foot, according to CBRE. Jacksonville, Florida had the biggest year-over-year growth, at 7%. Other Florida markets among the 10 largest year-over-year growth gains were West Palm Beach, at 6.1%; Fort Lauderdale, at 5.1%; and Tampa, also at 5.1%.

Retail Foot Traffic Strengthened in June

Retail foot traffic increased 1.7% from May to June and 0.26% year over year, according to Colliers’ U.S. Retailer Industry Foot Traffic Analysis. Total retail sales climbed 0.2% from May to June. The average number of times a customer visited the same store in June was 2.9.

5 Recent Property Trades and What They Say About the Industry

Investors are willing to buy older malls that are not in the best condition, especially if they’re zoned to add residential.

Take the recent sale of two parcels that make up the 1.5 million-square-foot Westfield Mission Valley in San Diego. Unibail-Rodamco-Westfield sold the properties, which were built in the 1960s and most recently renovated in the 1990s, for a combined $290 million. They’re 71% occupied. The sales of Westfield Mission Valley East to Lowe and Real Capital Solutions and of Westfield Mission Valley West to Sunbelt Investment Holdings reflect a combined initial yield of 8.5%, according to URW. The buyers are paying 12% less than the property’s last appraisal.

Spaces near high-income residents and with high traffic counts command high prices.

PRP Real Estate Investment Management acquired the 95,000-square-foot Spring Valley Village for $47.5 million. The 84-year-old, six-building property is 98% leased to such tenants as Crate & Barrel, Capital One and Starbucks and was renovated and expanded in 2017. Spring Valley Village is one of the oldest shopping centers in the Washington, D.C., metropolitan area and is listed on the National Register of Historical Places. PRP plans to bring in retailers that have been clamoring to get closer to the wealthy residents of nearby Maryland’s Bethesda, Chevy Chase and Potomac.

Investors are purchasing not just distressed properties but also institutional-grade retail centers online.

The lender-owned, 139,000-square-foot Pocatello Square in Idaho sold via online auction platform RI Marketplace. Tenants at the fully leased, 17-year-old property include Dick’s Sporting Goods, Grocery Outlet and Old Navy. Kidder Mathews represented the seller, CWCapital.

Mixed-use developers are snapping up well-located but struggling malls for conversion.

Wilder and a private client purchased the 429,285-square-foot Walpole Mall near Boston. Tenants include Aldi, Barnes & Noble, Kohl’s, Old Navy and Panera. “Wilder’s operations team has the flexibility to consider contemporary retail merchandizing strategies and potential mixed-use component development strategies,” said senior vice president of acquisitions and business development Brian Cosentino.

Buyers are seeking properties that have below-market leases and that they believe they can improve.

Private equity real estate fund Prudent Growth bought the 83,354-square-foot Westwood Plaza in Greenwood, South Carolina, from Big V Property Group for $10.8 million. “Westwood offers a compelling combination of a durable tenant roster with value-add opportunities through leasing and below-market rents,” said Lane Breedlove, director for Cushman & Wakefield Retail Investment Advisors, which represented the seller. Anchors include Planet Fitness, Dollar Tree and a new Popshelf.