Macy’s real estate in major cities is eye-catching—Cowen’s Chen calculates the Herald Square location alone could account for roughly 20% of the portfolio’s value. “That will be a desired asset forever,” says James Gellert, executive chair of Rapid Ratings, which analyzes companies’ financial health. “They really have something special, and that gets valued quite highly.”

But the Macy’s bid could be a signal that investors see unappreciated value in the company’s real estate—including its midtier mall locations, says Brandon Isner, CBRE’s Americas head of retail research. “Retail real estate can be bought for less than it can be built, as it’s priced fairly low, despite retail fundamentals being at a generational high,” Isner says.

The land ”is so valuable because there’s a lot of it—especially on mall sites—and it’s fairly easy to convert to other uses,” he says. Among them: fulfillment centers, parking, and mixed-use apartments—or simply repurposing a large retail space to house two or three separate stores. Plus, malls are often located in desirable areas near travel corridors.

CBRE sees asking retail rent rates picking up in the second half of 2024 after remaining about level in the first half. “There’s a lot of retailers that have been out there talking about how they’re still full-on in expansion mode,” Isner says.

There’s some evidence that these midtier locations can be successfully redeveloped. In Los Angeles, a closed Macy’s was recently transformed into a top-of-the line office for tech companies.

barrons.com - Malls are still a hot investment just look at macys buyout bid