Small-shop space at Brixmor hit a record 92.8% leased as new rents jumped 42.6%

The biggest owners of neighborhood shopping centers have little small-shop space left to lease. Brixmor said its small-shop leased rate hit a record 92.8% at the end of September, and its total portfolio reached a record 95.6% ^[1].

Anchors, the grocery stores and big boxes, are still fuller. Kimco’s anchor space was 98.2% leased and Phillips Edison’s 99.0% ^[2][3].

New tenants are paying far more than the ones they replace

Brixmor signed new leases at rents 42.6% above the prior rent on comparable space and renewals 19.4% above ^[1]. Kimco’s renewals came in much lower, at 7.3%, while its new leases ran 31.5% higher ^[3].

Same-property income grew between 4.9% and 6.6% at the three landlords

Same-property net operating income grew 6.6% at Brixmor, 5.3% at Phillips Edison and 4.9% at Kimco ^[1][2][3]. Brixmor also agreed to buy into a $2.34 billion grocery-center portfolio from Slate Grocery REIT, expected to close in the first quarter of 2027 ^[1].

Kimco signed 444 leases covering 2.7 million square feet in the quarter, and its leased rate ran 3.9 points ahead of the share of space actually paying rent ^[3].

How to use this

For owners of small strip centers

1. Re-run market rent on every small-shop lease expiring in the next 18 months. Renewals at Phillips Edison averaged 25.2% above prior rents ^[2], so a $24 per square foot tenant renewing at that spread would pay about $30, we calculate.
2. Use the large landlords’ pricing as a ceiling check, not a target. Kimco renewed at 7.3% while signing new tenants 31.5% higher ^[3], so the gap between renewal and replacement rent is also a measure of how much downtime and buildout a new tenant costs.
3. Value your center against recent trades. Brixmor bought Village West Shopping Center, a 195,862 square foot grocery-anchored center in California, for $49.5 million, about $253 per square foot, we calculate ^[1].

For small business tenants

1. Open renewal talks 12 months early and ask for the landlord’s offer in writing. With small-shop space at 92.8% to 95.1% leased at these landlords ^[1][2][3], your negotiating room comes mostly from the cost of finding your replacement.
2. Ask for renewal options with set rent bumps in any new lease. Kimco’s option renewals ran 7.7% above prior rents, close to its 7.3% renewal spread and far below its 31.5% new-lease spread ^[3].

For investors

1. Ask sellers of small centers for a schedule of signed leases with opening dates, since the gap between leased and paying space can be large. At Kimco it was 3.9 points ^[3].
2. Count signed-but-not-open rent as near-term growth, and discount it for tenants that never open. Brixmor had $68.9 million of it on 3.1 million square feet, about $22 per square foot, and Kimco $76 million ^[1][3].