Macerich wants to squeeze more profits out of the common areas at its top malls, so it is determinedly converting temporary tenants into permanent ones, and even tempting some in-line tenants out into the open. In the third quarter, the REIT’s temporary tenant occupancy dropped 50 basis points on a year-over-year basis, according to CFO Thomas O’Hern. Meanwhile, permanent occupancy rose 30 basis points during the same period. “During the quarter we converted 52,000 square feet from temporary to permanent tenants resulting in 109 percent rent increases,” O’Hern said.
All this work contributed to same-center NOI growth of 7 percent at the Santa Monica. Calif.–based REIT's 51 malls in the third quarter.
The company hopes to continue the trend by installing higher-end permanent kiosks to give brands and retailers more access to the most in-demand properties. “We’re focused on enhancing the revenue generation and elevating the customer experience,” O’Hern said, “with a particular emphasis on fortress assets for both permanent kiosks and business development opportunities.”
By year’s end 2015, Macerich’s annual permanent kiosk revenue will have increased 20 percent compared to the 2014, he added. At the company’s Santa Monica (Calif.) Place, leasing agents have been able to attract such users as Starbucks, U.K. skincare company Aesop, and Pressed Juice into the common area. “All of these will impact revenue and enhance our customer experience,” O’Hern said.
