As most retailers have halted growing their footprints, mall and shopping center landlords are forced to compete for the best in the business. A deal for Nordstrom marks just the latest example of this trend.
The high-end department store chain revealed late last week it will be leaving Oak Park Mall in Overland Park, Kansas, for Country Club Plaza, roughly 12 miles down the road in Kansas City.
The move won't officially happen until 2021, but Nordstrom will then be upgrading from a "B" mall, owned by CBL Properties, to an "A" mall, owned in a joint venture between real estate investment trusts Macerich and Taubman Centers.
"Exciting new retail and dining will ensure [Country Club Plaza's] future success and that it remains the crown jewel of the market," Taubman Chief Operating Officer William Taubman said about the deal.
Nordstrom added that the move will allow it to offer a freshened shopping experience with better digital capabilities in its new building.
"You're seeing more pressure on 'B' [and 'C'] rated malls because the retailers — Nordstrom being the best of the department stores — they want to be in the best malls," Boenning & Scattergood analyst Floris van Dijkum told CNBC.
"The good malls will pick off the good tenants," van Dijkum said. "It's indicative of the heightened competition. ... Nordstrom is making a rational decision to go from a $460 sales-per-square-foot mall to a $625 sales-per-square-foot property."
Meanwhile, CBL will be forced to fill a giant gap at a time when not many big-box anchors are growing. Dividing the space for a handful of smaller tenants, such as a gym or a grocer, could be one route the REIT might take.
"We are excited about the opportunity to recapture this prime real estate for future redevelopment," a CBL spokeswoman told CNBC.
"The retail environment is changing rapidly and this decision provides us with an excellent opportunity to transform Oak Park for even greater success in the future," she added. "Our team has ample time to evaluate various redevelopment scenarios in order to create the plan that makes the most sense for the market."
According to industry experts, landlords have been battling for brands and trying to sweeten the pot for deals like this — Nordstrom's move to Country Club Plaza — to happen for years. The trend is only being exacerbated as the retail landscape becomes more cutthroat, and there are fewer tenants looking to grow.
Hulen Mall, an asset owned by General Growth Properties in Fort Worth, Texas, has been picking off retailers from Ridgmar Mall, a privately held center, for years.
"A lot of these conversations go on behind the scenes," Mizuho Securities analyst Haendel St. Juste told CNBC. "Mall owners are always trying to upgrade their offerings."
Country Club Plaza is closer to a more affluent community, its tenant mix is more "high-quality," and there are more jobs in that area, St. Juste explained. Macerich and Taubman are also both expected to invest more in the property — upgrading the exterior, among other changes — in the coming years.