A commercial real estate parcel is a small piece of land that is usually around a retail or shopping center, but is still part of the overall property. These parcels, also commonly called pads, are used to increase the value of a larger property by constructing small buildings for businesses such as small retail stores, QSRs, bank branches, and other service-based retail options. These parcels are very attractive to national retailers because they offer unique advantages over space within a traditional shopping mall.
Why Outparcel is leading the leasing industry today
In the past, outparcels were viewed by many as peripheral buildings housing small businesses that were added to centers as an afterthought and, as a result, were not properly planned or developed to complement the businesses within the shopping center. However, today, shopping centers are using outparcels to effectively increase the center's overall profitability by leasing them to complementary businesses that allow shoppers to spend more time and money in these centers. This trend has become more pronounced in the wake of the COVID pandemic, which has driven a shift away from indoor shopping malls and accelerated the closure of already failing business models.
Outparcels offer a wide range of benefits in the current market, including customer-focused conveniences such as drive-thru, mobile ordering, curbside pickup, and increased visibility over traditional indoor mall spots. As such, many property owners and developers are considering redeveloping their existing space to include these options for customers. QSRs are also increasingly stacking multiple drive-thru lanes to optimize service, and dedicated outparcel space facilitates these changes. Additionally, many companies are purchasing older drive-thru-enabled locations for redevelopment rather than starting new developments. This trend is especially prevalent in cities and jurisdictions with more restrictions on drive-thru development and strict stacking requirements that limit opportunities.
In the current market, large pads are not attractive for seated concepts.
Historically, these were popular spots for traditional sit-down restaurants, but in today’s market, these larger pads are not attracting as many sit-down concepts. In the past, one or two pads in front of a retail center were suitable for a restaurant, providing space to develop and serve customers visiting the center. Today, increasing costs are making it harder to secure sit-down concepts. Many restaurant concepts are still attracted to these types of properties, but current rental rates have priced them out. These rising rents are favorable for fast-casual dining and QSR outlets. The combination of convenience and profitability that comes with fast-casual dining concepts has led many traditional dining retailers to offer their customers an option. As a result, off-site land is increasingly being divided into multiple pads to allow for a variety of options, capitalizing on the high traffic brought by other businesses and creating bustling corners and large retail centers.
Commercial real estate outparcels have come a long way from the days when they were considered peripheral buildings housing small businesses to becoming an increasingly popular property type in today's market. This is primarily enabled by leasing to complementary businesses that allow shoppers to spend more time and money in the center, and redevelopment trends to include convenience options such as drive-thru and curbside pickup. This shift toward outparcel development, along with changing customer preferences post-COVID, is shaping the current retail development and leasing market.
Joshua Simon >
Founder and CEO
Joshua Simon, founder and CEO of SimonCRE, directs day-to-day operations and leads the company's growth strategy. He spearheads a team dedicated to developing projects that benefit clients and the communities they serve. When not in the office, Joshua acts as an advocate for the CRE community, serving on several committees and speaking as an industry expert at various conferences.