The Lebanon Reporter – 04/15/2025

By CARSON GERBER | CNHI STATE REPORTER

They’re not attractive or exciting. No one really talks about them. But right now, they’re a hot commodity.

Indiana’s lowly strip malls are making a roaring comeback after years of stagnation, defying predictions that the all-pervasive retail centers would fade away as consumers turned to Amazon and other online shopping.

A case in point: a nearly 70-year-old, worn-down shopping center in Jeffersonville that sits around 35% unfilled is getting a full-scale remodel.

The Youngstown Shopping Center was purchased last year by Legacy Commercial Property, which buys underperforming buildings to remodel and lease. The company plans to breathe new life into the property to attract new tenants and revitalize the area’s retail shopping scene, according to Vice President Ben Hoogland.

“Strip centers are doing great,” he said. “This is a piece of real estate that’s highly valuable and just has not been invested in to really draw out its potential.”

It’s a trend happening across the state. Strip malls are becoming the go-to real estate choice for both box stores and mom-and-pop shops as Hoosiers’ shopping habits evolve in the era of e-commerce, argued Sara Coers, associate director of Indiana University’s Center for Real Estate Studies.

“No one really talks about strip retail because it’s just so unsexy,” she said. “But they’re very hot right now. They cater to how we feel about shopping and the kind of goods that we are willing to go out and physically buy.”

RENAISSANCE

The strip-mall renaissance comes as consumer appetite for retail shopping remains strong following the lockdowns and social distancing during COVID, explained Coers. But as demand soared, new retail construction plummeted due to skyrocketing construction costs.

“All of a sudden it was like, ‘Oh man, lots of people want this, and we haven’t built enough,’” she said. “Now we have the same kind of supply-demand imbalance with strip centers that we had with housing four or five years ago.”

At Coastal Equities, which owns older strip centers in Kokomo and Terre Haute, that demand led to the company’s best leasing year on record. In 2021, as COVID restrictions eased, around 100 new tenants nationally moved into their properties, noted Jude Crayton, director of leasing.

“There was just so much pent-up demand,” he said.

That demand has only grown stronger as retail space becomes more scarce.

In Indianapolis, the retail vacancy rate (2.3%) is nearly the lowest in the country, according to a 2025 national investment forecast from Marcus & Millichap, a real estate and mortgage brokerage firm. Boone and Hendricks counties had the lowest vacancy rate at just 1.6%.

Even so, planned construction in the Indianapolis metro area this year will only add 430,000 square feet of new retail space — a “minor uptick” of just 0.4%, according to the report. High demand for current retail space has pushed rental rates up by around 5% in just two years.

The demand for Coastal Equities’ shopping centers has allowed the company to land higher-rent tenants when big-box retailers like Joann Fabrics or American Freight go bankrupt and close, noted Crayton.

“You’re not seeing a lot of new shopping centers being built, so some of these tenants, if they want to continue to grow… they’re going to have to start looking at some of these second-generation spaces,” he said.

The high cost of construction is what drew Legacy Commercial Property to invest and renovate the strip center in Jeffersonville. Rather than building something new, revamping an old strip center with lots of available space is a cheaper way to create more retail space in the city, Hoogland said.

“Retailers are still looking to grow, but they’re looking for certain product types and they have nowhere to go,” he said. “We really felt like the vacancy rate in the market left room for an opportunity like this.”

Now, the strip-mall hot streak has caught the attention of Wall Street. In November, investment juggernaut Blackstone spent $4 billion on Retail Opportunity Investments, which owns 90 shopping centers on the West Coast, marking its largest retail investment since 2011.

“When big investors like Blackstone start buying, that should tell you a lot about where the market is going,” said IU’s Coers.

NEW SHOPPING

The lack of retail space isn’t the only driver behind strip malls’ comeback. The easy-in, easy-out retail areas cater to the new gold standard in shopping: convenience.

While America’s indoor malls were once considered retail meccas, many have closed as consumers shifted toward the ease of strip malls over the hours-long shopping experience indoor malls demanded, Coers said.

“Going to a mall is really a leisure event, and no one really wants to do a leisure event on a daily basis anymore,” she said. “Strip centers are really all about convenience, and that’s why most retail has gravitated to them.”

The types of businesses moving into the centers has also propelled their success as retail adapts to the new reality of online shopping, explained Kristen Neyland, director of food and service retail for Crow Holdings Capital, a real estate investment and development firm.

The services, products and experiences consumers can’t buy online are now the bread-and-butter businesses that draw customers to strip centers, she noted.

“You can’t get your hair cut and your nails done on the internet, and if your iPhone breaks, you’re probably going to go into the iPhone repair place and get it fixed,” Neyland said in a podcast discussing strip centers.

That’s a trend playing out in the strip center in Kokomo, which is anchored by a Kroger and Rural King. The mall is now home to a gym, tanning salon, collectible-card shop, Rent-A-Center and a golf-simulator business.

“Obviously, you can’t get any of that stuff online,” noted Crayton with Coastal Equities.

Add it up, and the strip centers scattered throughout every Indiana town and city are set for a robust future as retail shopping regains its place in the state’s undersupplied real-estate market, argued Coers.

That doesn’t make strip malls any sexier, she noted, but it does make them successful.

“It ain’t pretty and it’s not novel or exciting,” Coers said. “But the strip center has been around since the 50s, and it is the one thing that always keeps coming back, because convenience and the types of tenants that it caters to are always needed.”