An outlet center is a retail property, open-air or enclosed, made up of manufacturer and brand direct stores selling brand-name goods at a discount. Outlet centers draw shoppers from a wide, often tourism-driven trade area to drive-to locations off major highways, and they run without the department store anchors that define a regional mall.
How an Outlet Center Works
An outlet center works by concentrating manufacturer and brand-operated stores that sell surplus, prior-season, or made-for-outlet merchandise at a discount, in a single drive-to property sized for a wide trade area. The International Council of Shopping Centers classifies outlet centers as a specialty format, typically 50,000 to 400,000 square feet of gross leasable area.
The format trades convenience for draw. Where a neighborhood center serves a three to five mile radius, an outlet center pulls from a regional or tourism trade area that can span 50 miles or more, which is why developers place them off interstate corridors near destinations rather than inside dense retail districts. ICSC notes that open-air centers, the category that holds most outlets, account for roughly 85% of total U.S. shopping center gross leasable area.
Tenants are the brands themselves, not third-party discounters. The store is operated by the label on the sign, which lets the brand clear inventory without discounting its full-price channel. Landlords underwrite this mix on sales productivity and percentage rent rather than anchor credit, because the format has no anchor in the mall sense.
Why an Outlet Center Matters
An outlet center matters because its value rests on tenant sales productivity, not on anchor lease term. With no department store anchor to set the risk profile, the operator underwrites the property on sales per square foot, percentage rent, and the durability of the trade area draw, so tenant health reads directly through reported sales.
Sales productivity in the format is high. Outlet REIT Tanger reported tenant sales productivity near $470 per square foot on a trailing twelve-month basis in its 2024 filings, a figure that sits within the broad range for productive open-air retail. Because many outlet leases carry a percentage-rent component, rising tenant sales convert into landlord income without a new lease negotiation.
The quotable point: an outlet center is priced on what its tenants sell, not on who anchors it, so sales per square foot is the number that carries the asset.
Example
An outlet center is best understood next to the two retail formats it is most often confused with, a lifestyle center and an enclosed mall. The table below contrasts the three on tenant type, location, and a representative sales-per-square-foot range, using the format characteristics ICSC uses to classify centers. Sales figures are representative ranges, not fixed rates.
Attribute | Outlet center | Lifestyle center | Enclosed mall |
|---|---|---|---|
Tenant type | Brand and manufacturer discount stores | Upscale full-price specialty and dining | Department store anchors plus inline |
Location | Drive-to, off-highway, tourism trade area | Affluent suburban infill, near rooftops | Regional site, dense retail node |
Anchor | None in the mall sense | Grocery, cinema, or none | One or more department stores |
Sales per SF (representative) | $400 to $500 | $350 to $500 | $300 to $450 |
The outlet center is the format that combines discount brand tenants, a drive-to regional location, and no department store anchor. A center carrying all three traits is an outlet center, even if a marketing name calls it a mall.
Variations and Edge Cases
Outlet center is not a single template. The format spans open-air and enclosed layouts, pure-discount and mixed rosters, and locations that range from remote highway sites to increasingly experiential destinations. The table covers variants an operator confirms in diligence.
Variant | Treatment |
|---|---|
Factory outlet center | Classic open-air format, brand stores clearing inventory off a highway corridor |
Enclosed outlet | Same tenant model under a roof, common in cold or tourism climates |
Designer or luxury outlet | Premium labels, higher sales per square foot, often near resort destinations |
Hybrid outlet-lifestyle | Discount brands mixed with full-price dining and entertainment to add dwell time |
Value or off-price center | Third-party off-price operators rather than brand-run stores; not a true outlet roster |
The common mistake is labeling any discount-heavy center an outlet center. The defining trait is brand and manufacturer direct stores. A property leased to third-party off-price operators is a value or off-price center, a related but distinct format under ICSC classification.
Outlet Center vs Lifestyle Center
An outlet center is often confused with a lifestyle center, and the two sit at opposite ends of pricing and location strategy. An outlet center is a drive-to property of brand and manufacturer discount stores serving a wide, often tourism trade area. A lifestyle center is an upscale open-air property of full-price specialty retail and dining placed near affluent rooftops.
The difference is what the shopper drives for. An outlet shopper travels a long distance for a discount and treats the trip as a destination. A lifestyle shopper visits a nearby center for full-price goods and dining. That split drives site selection and rent structure: outlets lean on percentage rent tied to sales volume, lifestyle centers on higher base rent from full-price tenants.
Frequently Asked Questions
What is an outlet center in commercial real estate? An outlet center is a retail property of manufacturer and brand direct stores selling brand-name goods at a discount, usually open-air and built in a drive-to location that serves a wide, often tourism-driven trade area. It runs without the department store anchors that define a regional mall.
How is an outlet center different from an outlet mall? Outlet center and outlet mall describe the same format, brand and manufacturer stores selling discounted goods to a regional trade area. Outlet mall is the common consumer term, while outlet center is the classification the International Council of Shopping Centers uses for the specialty retail type.
What sales per square foot do outlet centers generate? Outlet centers are productive retail. Outlet REIT Tanger reported tenant sales productivity near $470 per square foot on a trailing twelve-month basis in its 2024 filings, and productive open-air centers commonly range from roughly $400 to $500 per square foot depending on tenant mix and trade area.