What Is a Strip Mall?

For consumers, a strip mall is simply a place to run errands, shop, or maybe grab a coffee and a bite to eat with friends or colleagues. To a savvy-minded investor, the strip mall meaning is a little different and more nuanced.

With expert guidance and plenty of background research and due diligence, these convenient hot spots can represent a financial opportunity like no other. In this post, we’ll talk about how and when to invest in a strip plaza.

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Strip Mall Vs Plaza: Is There a Difference?

Most people tend to use the terms “strip mall” and “plaza” interchangeably. There are many similarities, so this is understandable. However, as an investor, it helps to understand the subtle differences.

A strip mall is typically a retail concept, a single one or two-storey building that contains various stores, services, or restaurants. Each store has its own separate entrance from the outside, while a shared parking lot accommodates all shoppers.

For visibility, strip malls usually exist in high-traffic areas. Busy roads near major highways or other attractions are premium locations.

A plaza has a more extensive meaning. A plaza could be a strip mall, but a strip mall is not necessarily a plaza. Essentially, a plaza refers to any retail space or even a public or civic square, such as Nathan Phillips Square. Urban plazas often offer numerous dining and shopping options but with a distinct community focus. They can be profitable for investors even if they don’t necessarily revolve around retail.

Strip malls are designed for local convenience. Lawrence Plaza in North York and the Golden Mile in Scarborough are well-known examples. A commercial real estate investor seeking a strip mall for sale would still need access to funding and a solid business plan. However, high consumer demand and profit potential can make the endeavour well worthwhile.

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Opportunities in Strip Malls

A strip mall offers numerous opportunities for investors at various levels. You could lease a space inside an existing property, giving you a chance to launch or grow your retail operation with relatively low risk.

With enough capital, you might consider purchasing the entire building and renting out separate units to local business owners. The right tenant mix could provide years of financial stability and passive income.

Hidden opportunities might be found with older buildings with below-market leases that are about to expire or a new strip mall in a fast-growing neighbourhood. Before proceeding, you will want to perform extensive due diligence to make sure your investment strategy is sound.

This involves a detailed cost versus profit analysis while assessing your resources to sustain long-term growth. An experienced and knowledgeable commercial real estate agent can help you pinpoint viable investments with excellent potential.

Types of Malls

Residential homes come in various sizes and structures. As it turns out, so do commercial buildings, including strip malls. Each style brings unique challenges and opportunities to investment-minded individuals. For example:

Neighbourhood Strip Mall: Think of a small retail outlet that services a few residential areas in a neighbourhood. Amenities often include a small grocery store and perhaps a pharmacy or a bank. Types of stores will vary; however, the one given is the local coffee shop!

Community Strip Mall: Larger than a neighbourhood mall, a community strip mall tends to serve a wider area. Typically, they’re anchored by a larger chain supermarket or department store, with a variety of restaurants and independent shops around.

Power Centre: A power centre can range from 100,000 square feet or more of retail space anchored by a major retailer like Walmart or Costco. Examples include the RioCan Colossus Centre in Vaughan as well as a variety of SmartCentres throughout Toronto.

Each of these types of malls represents different paths for investors. For example, a small commercial investor might look to a neighbourhood strip mall due to lower overhead costs. These can be an easier path to get into the market. However, a lack of recognizable brands can also be risky.

Investing in a Power Centre might put you on more solid ground, but you would need a tremendous amount of capital and experience to succeed.

Whatever path you choose, there are legalities such as zoning laws and other regulations to navigate, and the financing requirements are more stringent than with residential investing. An experienced commercial real estate agent is something you do not want to be without.

Before investing in either residential or commercial real estate, it helps to have some background knowledge. The posts below can help:

Considerations When Investing in Commercial Real Estate

Strip malls and plazas can offer unprecedented growth for commercial real estate investors. However, it’s critical to understand the risks and possibilities from every angle. For the best chance of success, you will want to create a crystal clear business plan that takes your long-term goals into account.

Whether buying a building or leasing a space, calculate your upfront costs while accounting for the unexpected. If you’re investing in new construction, consider the longer development times involved with complex approvals and codes.

Investing in strip malls may not be for everyone. However, by finding a strategic location with high-quality traffic and a strong community focus, the right property can greatly contribute to your ever-growing portfolio.

Whatever your goals may be, whether you are looking for a strip mall for sale, or any other commercial real estate, a Toronto commercial real estate specialist is an essential component of your success. If you have any questions, feel free to connect with me at OMarjanovic@kw.com or call 647.620.2882.