Posted on April 9, 2018

Michael Gantcher from RS Metrics contributes to Trepp site on:

Identifying Class-B Mall Performance From a Bird’s-Eye View

Parking lots aren’t simply a place to leave your vehicle while you pop in to the store; they can be the site of concerts, festivals, even championship parades (ask a New Jersey Devils fan about that if you have the chance). Parking lots can also serve a greater purpose in measuring CRE performance, especially in regards to retail. A mall’s parking lot can serve as an indicator for the building’s foot traffic, especially if the lot is less than full. With the retail sector under the microscope, we use this blog to examine data on customer traffic for a few US malls.

Sometimes, it’s helpful to view something from a different perspective to analyze it. When measuring customer traffic as a performance indicator, a bird’s-eye view might be best. RS Metrics partners with high-resolution satellite imagery firms, such as DigitalGlobe and Airbus, to derive data and trends on customer traffic at CMBS properties. This data can be used to highlight early indicators of slipping property performance.

The ABCs of Mall Class-ifications

For the purpose of this blog, we examined parking lot trends at malls by Class-ifications. The mall Class-ifications for this analysis takes several factors into account, both qualitative (tenant mix, geography, demographics, etc.) and quantitative (Sales per Square Foot, or SPSF). The SPSF for class-A malls are $500 or more, while class-B SPSF figures are in the range of $350 to $500. Class-C malls usually feature SPSF below $350. CMBS investors are comfortable owning debt on class-A malls and have shied away from debt exposure to class-C malls, leaving the fate of class-B malls as an open-ended question.

RS Metrics surveyed over 90 class-B malls across the country and indexed the monthly traffic figures from January 2016 to October 2017. We then compiled a large nationwide sample of both class-A and class-C malls and compared those average traffic figures to that of the class-B index.

The Monthly Average Fill Rate Index compares the average fill rate (cars/spaces) each month for a property or a set of properties. The starting point of the index sets the average monthly fill rate for each data series to 100 and shows the change of relative performance of each over time. For example, if the average fill rate for class-A malls is 50% and the average fill rate for class-B malls is 25%, then they would both be reflected as 100. If both class-A and class-B mall average fill rates are 50% in the following month, then the index would move class-B malls to 200 and would keep class-A malls at 100.

Read the full article here on Trepp.