Shopping center REIT Site Centers is breaking up its portfolio and creating a new publicly traded landlord focused on strip malls, a testament to how well the asset type is performing in this economic climate.

Ohio-based Site Centers is creating Curbline Properties Corp., which will be the first public REIT totally focused on the convenience sector, the firm said in a release. All of Site's 61 strip malls, which don't have a traditional anchor, will go into the trust, which will have a company valuation of $1.7B, The Wall Street Journal reports.

The average size of the property in the portfolio is 20K SF, and the properties were 96.2% leased at the end of September, according to a release.

“We believe that the Convenience real estate sector offers attractive, inflation-protected returns with limited capital expenditure requirements,” Site Centers CEO David Lukes said in a statement. “For SITE Centers, our work over the past six years has resulted in a carefully curated mix of dominant grocery, lifestyle, net lease and regional power center properties located in the top submarkets in the United States with compelling near-term net operating income growth.”

Curbline will start with the 61 assets transferred from Site Centers, then look to grow its asset pile in the “highly fragmented, but liquid” space. The spinoff is expected to be completed in the second half of 2024. Lukes would also serve as CEO of Curbline.

Site Centers plans to acquire more strip malls and add them to Curbline's portfolio before the spinoff becomes official.

The existing REIT would then be left with a portfolio of 83 properties, with the biggest concentration in the Atlanta, Boston and Orlando metro areas. It also announced that it had secured a new $1.1B mortgage from affiliates of Apollo tied to 40 of its properties.

Strip malls weathered the pandemic better than traditional retail, as many chain and department store tenants left their spaces in enclosed malls and opted for the open-air environments.

What's more, the properties have seen a significant jump in traffic since the pandemic began, as people have settled into more hybrid working arrangements. Yearly visits to strip malls increased 18% in 2022 from before the pandemic, according to data from RetailStat reported by the WSJ. That figure came from an analysis of foot traffic data from 2,500 centers.

National retailers have increasingly focused their attention on suburban locations, as affluent workers — who have previously spent most of their time in the cities at their desks — have sought out stores closer to home.

The spinoff of Curbline is something of an anomaly compared to recent trends in the retail REIT space, which has seen consolidation this year. Kimco Realty this summer agreed to buy RPT Realty for $2B in an all-stock deal, and on Monday, Realty Income reached a deal to acquire Spirit Realty Capital in a $9.3B deal.