New anchors will make malls more experiential in 2023. CBL, for one, announced experiential tenants will fill department store space at four of its properties. The landlord is adding Tilt Studio, a “family fun center,” to its two North Dakota properties, Dakota Square Mall in Minot and Kirkwood Mall in Bismarck. It also is adding Stars and Strikes at Coastal Grand Mall in Myrtle Beach, South Carolina, and Main Event bowling at Cross Creek Mall in Fayetteville, North Carolina.

“Over the last several years we’ve experienced an increase in demand from entertainment users, opening 11 large-scale, family-friendly entertainment options across our portfolio since 2017 with nearly a half dozen more in various stages of negotiation,” said CBL CEO Stephen Lebovitz. “Leasing demand at our properties is back to pre-pandemic levels, with nearly 3 million square feet leased through the third quarter of 2022.”

ALSO CHECK OUT: CBL’s “Meet Us at the Mall” campaign

The Dakota Square Tilt will open in December in the former Scheels, occupying nearly 50,000 square feet. Scheels recently relocated and expanded to the former Sears at the property. The Kirkwood Tilt, located in the former Herberger’s, will occupy 92,500 square feet starting next year. Stars and Strikes at Coastal Grand will occupy 52,000 square feet, replacing Dick’s Sporting Goods, which recently expanded and relocated at the property. And at Cross Creek, Main Event will occupy 38,000 square feet on the site of a former Sears.

CBL also has non-retail uses in negotiation, including a multifamily project, four hotels, seven medical uses, 23 restaurants and nine others, Lebovitz said.

Kimco Is Becoming an Umbrella REIT

As competition for supermarket-anchored assets heats up, Kimco Realty is adopting a tax structure that might give it an advantage over competitors in acquiring properties from small private companies. Kimco will become an umbrella REIT, or UPREIT, which will allow sellers to exchange their properties for ownership shares in Kimco. Because they’re not liquidating their shares, these sellers can defer capital gains taxes significantly. Like a 1031 exchange, it’s an effective method of tax deferral and estate planning for smaller owners, experts said.

ALSO CHECK OUT: Kimco Realty Co-Founder Milton Cooper’s Trailblazing Impact as the Father of Modern Equity REITs

CRE Asset Values Are Set to Decline in 2023

Grocery E-Commerce Appears to Be Slowing

Fewer consumers are buying groceries online, partly because they think the fees and other extra charges make it more expensive than shopping in-store. Across all U.S. grocers, e-commerce sales declined by 10% year over year in November to $7.7 billion, according to a report from consultancy Brick Meets Click. Fewer households placed orders in November 2022 than in November 2021, and those that did ordered less frequently and spent less, according to the survey.

How the Retailer Labor Shortage Impacts Multitenant Properties

Labor cost issues will continue to vex retailers in 2023, according to CBRE head of retail research Brandon Isner, and retailers will continue to struggle to find workers to staff their stores. While the retail workforce is stabilizing after all-time highs in both quits and job openings in late 2021 and early 2022, it is an expensive equilibrium: Retail wages rose 6% in 2020, outpacing overall wage growth by 110 basis points. In 2021, they rose 4.9% in 2021, outpacing overall growth by 70 basis points. As of the third quarter of 2022, wages were still on the rise, climbing 4.6% year over year, according to the U.S. Bureau of Labor Statistics. Despite better pay, retail workers remain unhappy. An August 2022 McKinsey survey found that 49% of retail workers were considering leaving their jobs in the following three to six months, which may leave retailers short-staffed as 2023 begins.

The issue is impacting landlords in a number of ways, including hours of operation. As some tenants reduce operating hours to accommodate limited employee availability, their hours cease to align with the hours at the properties they occupy. In that situation, some stores are open and others are not. Many stores at Taubman centers are opening later than the properties themselves in order to save on employee costs, Taubman president and COO Bill Taubman told the AP. That causes frustration among customers, he said.