The A-B-C's of Malls: The Critical Metrics That Determine a Mall's Grade

If you’ve ever visited multiple different malls, you’ve likely noticed a significant difference in their atmosphere, tenant mix, and overall experience. Some are sleek, high-end destinations with designer brands, lively food courts, and entertainment options. Others seem outdated, featuring empty storefronts and struggling retailers. These differences aren’t random; they reflect the mall’s classification in the commercial real estate sector.

Understanding mall ratings is crucial for investors, especially those new to shopping center investments. The classification of a mall—Class A, B, or C—impacts everything from rental income and foot traffic to long-term profitability and risk. Just as residential real estate is evaluated based on location, condition, and market demand, malls use financial and operational metrics to assess their strength in the retail market.

This guide outlines how malls are graded, the factors that influence their classification, and the significance of this for investors seeking to make informed, strategic decisions in the shopping center sector.

Where Did The Mall Grading System Originate?

The concept of grading malls emerged in the late 20th century as shopping centers became increasingly complex and varied in their performance. In the early days of retail real estate, malls were categorized simply based on size—regional malls, super-regional malls, and community shopping centers. However, as the industry evolved, it became evident that factors such as sales performance, tenant mix, and location significantly influenced a mall’s success.

Investment research firms like Green Street Advisors pioneered analyzing and classifying malls based on revenue and desirability. By the 1990s and early 2000s, real estate investment trusts (REITs) and major commercial real estate firms such as CBRE and JLL embraced these classifications to enable investors to compare assets more effectively.

Today, organizations like the International Council of Shopping Centers (ICSC) continue to refine these standards, offering data-driven insights to assist investors in navigating the evolving retail market. While these classifications are not legally required, they have become widely recognized as the industry standard.

Let’s dive into what defines Class A, B, and C malls.

Understanding The Mall Grading System

What Determines a Mall's Classification?

Malls aren’t graded randomly; specific financial and market-based factors determine their classification. Think of it like grading a restaurant: food quality (sales per square foot), service (tenant mix), location (demographics), and reputation (shopper experience) all contribute to its success or challenges.

Here are the main factors used to classify malls:

1. Sales Per Square Foot – This is the most important metric. A mall’s "report card" is its revenue per square foot, much like a hotel’s rating is tied to nightly rates and occupancy. Higher sales per square foot signal a stronger, in-demand retail space.
   
   
2. Tenant Mix and Anchors – A mall with Apple, Gucci, and Tesla stores is in a different league than one filled with discount shops and struggling retailers. Strong anchor stores (like Nordstrom or Target) signal stability.
   
   
3. Location and Demographics – Just as home values vary based on neighborhood desirability, malls perform differently depending on whether they’re in high-income suburbs, bustling urban centers, or struggling rural areas.
   
   
4. Occupancy Rates – A well-leased mall with minimal vacancies indicates strong tenant demand. Conversely, a mall with empty storefronts and frequent turnover raises red flags for investors.
   
   
5. Physical Condition and Amenities—Modern, well-maintained malls with attractive layouts and entertainment options hold their value better than outdated malls that need major renovations.
   
   
6. Market Perception and Shopper Experience – Some malls are seen as shopping destinations, offering unique experiences beyond retail. Others struggle to attract visitors, becoming ghost towns of empty storefronts.

Using these factors, malls are sorted into classes A, B, and C. Each classification indicates a distinct profitability, risk, and investment opportunity level.

Class A Malls: The Luxury High-Rises of Retail

Class A malls are the best of the best: the commercial real estate equivalent of luxury high-rises in Manhattan. These shopping centers attract high-income shoppers, feature premium tenants, and generate the highest revenue.

Key features of Class A malls include: 

• High Sales Per Square Foot – Often exceeding $700 to $1,000+ per square foot, reflecting strong consumer demand.
  
  
• Premium Tenant Mix – Housing flagship stores for brands like Louis Vuitton, Gucci, and Apple, along with high-end department stores such as Nordstrom.
  
  
• High Occupancy Rates – Typically 95% or higher, with retailers competing for space.
  
  
• Prime Locations – Found in major metro areas and affluent suburbs with strong consumer spending power.
  
  
• Experiential Retail—Many Class A malls offer more than shopping, including fine dining, entertainment venues, and even unique attractions like rooftop gardens or interactive experiences.

Investment Potential of Class A Malls 

Class A malls are like blue-chip stocks for investors: high-value, stable, and resilient in economic downturns. They attract long-term, financially strong tenants and generate reliable income. However, they also come with a hefty price tag, making them less accessible for beginner investors.

Class B Malls: The Suburban Workhorses

Class B malls are like solid, middle-class suburbs. They are functional and profitable but not as flashy as their Class A counterparts. These malls can be strong investments, particularly if well-managed or in a growing market. 

Typical characteristics include: 

• Moderate Sales Per Square Foot – Ranging from $400 to $700, reflecting steady but not elite performance.
  
  
• Diverse Tenant Mix – A mix of national retailers, discount stores, and regional brands.
  
  
• Occupancy Rates Around 85-95% – Some vacancies may linger, but the mall remains operational.
  
  
• Located in Secondary Markets – Often found in mid-sized cities or suburban areas rather than prime urban locations.

Investment Considerations For Class B Malls

Class B malls are more accessible for investors than Class A properties, offering opportunities for value-add strategies like renovations or re-tenanting. However, they require active management and may face pressure from e-commerce trends and shifting consumer habits.

Class C Malls: The Fixer-Uppers of Retail 

Class C malls are struggling properties, much like distressed real estate that has seen better days. Many investors view Class C malls as redevelopment opportunities—turning them into mixed-use spaces, office hubs, or even logistics centers for e-commerce companies. 

Common characteristics include: 

• Low Sales Per Square Foot – Typically below $400, signaling weak performance.
  
  
• High Vacancy Rates – Often 20% or more, with empty storefronts and frequent tenant turnover.
  
  
• Declining Foot Traffic – Located in areas with lower-income populations or shrinking retail demand.
  
  
• Outdated Infrastructure – Many Class C malls lack modern amenities and require significant renovations.
  
  
• Potential for Repurposing – Some investors see these malls as opportunities for redevelopment, turning them into mixed-use spaces, office hubs, or even fulfillment centers for e-commerce.

Should You Invest in a Class C Mall?

Investing in a Class C mall is high-risk, high reward. While these properties may come with low price tags, they often require heavy repositioning efforts to become profitable. For beginner investors, Class C malls can be challenging unless they have a clear strategy for redevelopment.

Why This Matters For Investors 

Understanding mall classifications is essential for beginner investors in the shopping center sector to make informed decisions. A mall’s grade affects its financial performance, tenant stability, and long-term potential, much like how a neighborhood impacts property values in residential real estate.

Recognizing the differences between Class A, B, and C malls helps investors align their choices with their goals and risk tolerance, ensuring smarter, more strategic retail real estate investments.

Closing Insights: Making Smart Mall Investments 

Like any real estate asset, malls vary widely in value and potential. Whether you're considering a stable, income-generating property or a high-risk redevelopment opportunity, understanding mall classifications helps you make more strategic investment decisions.

For beginner investors, well-located Class A or B malls offer the safest entry into the market, providing strong tenant demand and steady rental income. Those willing to take on more risk may find the opportunity to reposition struggling Class C malls, but success requires careful planning and market expertise.

By leveraging the mall grading system, investors can better assess risk, maximize returns, and position themselves for success in the evolving retail real estate sector. Ready to dive deeper? Explore our Learning Center and YouTube channel for expert insights and industry trends that can help guide your investment journey.