Is the era of big shopping malls over? Not quite yet … as long as mall operators can get creative

The Easton Town Center in Columbus is one example of a mall that gets it right: Innovation and an urban feel have led to its success.

The Easton Town Center in Columbus is one example of a mall that gets it right: Innovation and an urban feel have led to its success.

by Dan Rafter

The Midwest is home to plenty of dead or dying shopping malls, indoor ghost towns that once buzzed with families dining at food courts, teens hanging at clothing stores and young couples holding their first dates at multiplex movie theaters.

What went wrong with these dead malls? Why did the shoppers stop coming?

And does the growing number of dead malls mean that the era of the massive enclosed shopping mall is over?

Not quite. While a distressingly high number of Midwest malls are struggling to keep their doors open, others are thriving. What separates the dying mall from the thriving one? Plenty, according to Midwest retail experts.

The recipe for success

What makes for a successful shopping mall? Al Isaac, president of NAI Isaac in Lexington, doesn’t have to look far: Fayette Mall is located in Lexington. And the 1.2-million-square-foot mall is thriving.

Even better? The owners of the mall aren’t content. They’re now in the middle of a redevelopment project at the mall, adding a new mix of retailers around the existing center, including a soon-to-open Cheesecake Factory and H&M store.

Why has the Fayette Mall succeeded when so many others have struggled? Isaac points to competition — or a lack of it — and location.

“This is the only mall in the general vicinity of central Kentucky,” Isaac said. “And Fayette Mall is still located in the number-one retail corridor in Lexington. A lot of malls that are struggling were once located in the heart of their community’s main retail districts. But then the retailers moved to new locations, leaving the malls behind. That hasn’t happened with Fayette Mall. It is still on the number-one shopping road in Lexington.”

Fayette Mall also has size going for it, Isaac said. Many of the struggling malls he sees are smaller ones, 200,000 square feet to 300,000 square feet. These malls struggle to generate business on their own once the majority of retailers move to another area of town, Isaac said.

Lexington is no stranger to dead malls. The city was once home to Turfland Mall, a 498,000-square-foot mall that opened in 1967 and closed in 2008. Construction crews demolished the mall in 2014. A mixed-use development, including a new University of Kentucky HealthCare clinic, will rise from the site.

Part of the problem with Turfland? Isaac says that the owners struggled to bring in the right mix of tenants to appeal to today’s shoppers.

That isn’t the case at Fayette Mall. The busy mall is home to such big-name retailers as Aeropostale, Macy’s, the Microsoft Specialty Store, the Disney Store and rue21. It also features plenty of eateries, including Red Bang Sushi, Sarku Japan and P.F. Chang’s.

It’s a shopping mix that keeps the business coming.

The mall’s ownership also runs an active Web site, one that promotes the merchants at Fayette Mall but also advertises special events and sales. The Web site even has a special section titled “Buzz.” This section runs videos focusing on such key retail moments as back-to-school days and adult fashion trends. The section also advertises upcoming films coming to the mall’s movie theater.

The Web site, of course, would do little for Fayette Mall if the mall’s location and tenant mix weren’t so strong. The site, though, does provide a boost to a mall that’s already thriving. It’s also more evidence that mall ownership isn’t taking the mall’s current success for granted.

Lee Peterson, executive vice president of brand, strategy and design at WD Partners in Columbus, Ohio, is a retail expert. He says that shopping malls that don’t innovate will always struggle to capture the spending dollars of today’s shoppers.

“The fate of shopping centers is similar to the fate of physical retail stores in general,” Peterson said. “Because of the rise of online shopping, there will be fewer stores out there. But the stores that are out there are going to have to be more interesting places if they want to survive.”

And that’s a lesson from which all malls — even the most successful — can learn. To survive today, malls have to constantly introduce new features, new retailers and additional amenities.

If they don’t? They could end up like the Charlestowne Mall.

Can this mall be saved?

The Charlestowne Mall in the Chicago suburb of St. Charles, Ill., has been a ghost town for nearly eight years.

Its interior stores sit empty. The Sears store that once served as one of its anchors is abandoned. The food court lost everything, a Japanese restaurant and Cajun stand finally gave up earlier this year. The merry-go-round on the second floor — $1 rides — has shut down for good.

Changes, though, are coming to this once-bustling mall.

The Krausz Companies, a developer based in San Francisco, bought the mall in November of last year, spending more than $9.5 million for the property. Company officials have sold St. Charles leaders on their plans for the fading mall: Krausz plans to keep the building as an enclosed shopping mall, but will remove the vacant Sears anchor store, surround the property with restaurants and other retailers and give the entire property more of a “downtown” type feel. The mall is getting a new name, too, the Quad St. Charles.

A proposed new look for the Quad St. Charles.

The proposed new look for the dying Charlestowne Mall in the Chicago suburb of St. Charles.

Krausz Companies plans to unveil the new mall in 2016. The mall’s Van Maur, Carson Pirie Scott, Classic Cinemas and Kohl’s stores will remain open during construction. The renovation plans will cost $70 million.

Not everyone in St. Charles, though, expects the project to succeed. The mall has long been in serious decline. One commenter on the St. Charles Patch news Website wondered what new retailers will be coming to the mall when St. Charles is already home to so many busy retail strip centers, adding that the plans are “a tremendous waste of money.”

William Di Santo, president of Lemont, Ill.-based Englewood Construction, has seen plenty of suburban malls struggle, much like Charlestowne Mall. The problem, he says, is that the traditional suburban regional mall doesn’t hold as much appeal to today’s shoppers as it once did.

“When companies were building these malls in the 1970s and 1980s, families would spend the day at the mall,” Di Santo said. “They would go to the movies, do their shopping, get something to eat and be there for the day. The Gen X and Gen Y shoppers, though, don’t want that. They shop online. They shop more efficiently. They shop for value. Today’s younger shoppers don’t want to spend all day in an enclosed shopping mall.”

Another view of the proposed new look for the Charlestowne Mall.

Another view of what developers hope will be the future for the Charlestowne Mall.

The Charlestowne Mall does face many of the problems typical to struggling malls today. St. Charles and its next-door neighbor community of Geneva are filled with retailers. Consumers can drive to three Target stores alone all within 15 miles of each other. the Geneva Commons outdoor mall offers plenty of high-end and boutique stores such as Pottery Barn, Chico’s, Charming Charlie, PINK and doggie boutique Wet Noses. It also boasts popular restaurants such as Five Guys Burgers & Fries, California Pizza Kitchen and the Claddagh Irish Pub.

The question, then, is does St. Charles need more retail? And does it need an old-fashioned enclosed mall, even one that’s been updated?

It’s a question that local shoppers will answer in 2016 when the Quad St. Charles opens its doors.

Grim numbers

The fate of this mall, though, is more uncertain than ever. More mall closings could be coming soon, largely because of the struggles of traditional mall anchors J.C. Penney Co. and Sears Holding Corp. According to Green Street Advisors, about half of the 1,050 indoor and open-air shopping malls dotting the United States today feature both of these struggling companies as anchor tenants.

Green Street says, too, that of these malls, about 25 percent are already limping along with sales that are below $300 a square foot. They also have vacancy rates higher than 20 percent.

If these malls lose their J.C. Penney or Sears stores? Then they could struggle to fill the large spaces these retailers lose behind. And that could push these already fading malls closer to closure.

Mall statistics are already grim. CoStar Group says that only six new malls have been built in the United States since 2010. CoStar also reports that the number of dead malls in the country — which the company defines as those with vacancy rates higher than 40 percent — stands at 74. That figure has nearly tripled since 2006.

Part of the problem is that sales at shopping malls have been largely stagnant, as consumers shop in other ways. The International Council of Shopping Centers says that sales-per-square-foot at U.S. malls rose just 2.6 percent last year. It’s good, of course, that sales rose. But that increase in sales was the lowest U.S. malls have seen since 2009.

A mall that died — and isn’t missed

One mall that never did make the transition from dying to thriving was the City Center Mall in downtown Columbus. There was a time when this mall boomed. Today? It no longer exists. The city demolished the mall and built a community park on its site. That park, Columbus Commons, opened in May of 2011 and covers nine acres.

While the mall failed — falling victim to increased retail competition — the park is actually thriving.  More than 200 events, including Shakespeare in the Park and the Capital City Half Marathon, are held in the park every year.

The carousel at Columbus Commons continues to attract crowds.

The carousel at Columbus Commons continues to attract crowds.

The park has since become a gathering place for visitors to and residents of Columbus. And that’s been important to the health of the city’s center. It’s certainly done more for downtown Columbus than did the City Center Mall in its decaying final days.

Amy Taylor, chief operating officer of the Columbus Downtown Development Corporation, told Midwest Real Estate News in a previous interview that urban green space can bring more retail to the heart of a city. It’s true that Columbus lost an urban mall. But new retailers have since come to downtown Columbus.

And what has brought them? The increased foot traffic generated by the downtown park has helped, Taylor said.

“When we were building these parks, some detractors would say that you just couldn’t get people to come to downtown Columbus,” Taylor told Midwest Real Estate News. “I think we’ve proven them wrong.”

While Columbus has lost the City Center Mall, it is home to one of the more successful malls in the Midwest, the Easton Town Center.

The Easton Gateway expansion is expected to draw even more visitors to the Easton Town Center in Columbus.

The Easton Gateway expansion is expected to draw even more visitors to the Easton Town Center in Columbus.

This mall attracts more than 30 million visitors a year. But its owners aren’t content. Last year, Steiner + Associates, The Georgetown Company and Limited Brands began construction of an addition to the center, Easton Gateway. The 54-acre addition has brought such big-name retailers as REI, Dick’s Sporting Goods and Field & Stream to the mall.

This is what successful malls today do: They keep growing and they continue to add to their mix of tenants as a way to keep the shoppers coming.

Easton Gateway was already successful, though, in large part to its look and feel: The center looks like a real downtown more than it does a traditional shopping mall, with green spaces, wide walkways and plenty of public seating.

The center also boasts more than just traditional retailers, with plenty of entertainment options, too. There’s a movie theater, of course, but there’s also a comedy club and nightclub. There’s even a World of Beer, a destination spot for lovers of craft beers.

“I think the design is what makes this mixed-use center so special,” said Yaromir Steiner, chief executive officer of Steiner + Associates in an earlier interview with Midwest Real Estate News. “It has a sense of place.”

The Easton Gateway addition comes 15 years after the opening of the original Easton Town Center. It’s official planned opening is this October.

Peterson from WD Partners says that the Easton Town Center is succeeding today because there are attractions at the center that appeal to shoppers of all ages. There are outdoor parks and play areas for children, something that attracts young families. There are large department stores on the mall’s fringes, attracting hardcore shoppers looking for apparel and home goods. The mall boasts specialty and smaller apparel stores in its center, shops that attract consumers who favor quirkier one-of-a-kind products.

“You can go to the Easton Town Center for multiple reasons,” Peterson said. “You can go for the fashion stores, to see a movie or for dinner. It’s not just a place for big department-store shopping. It’s not just for specialty retailers. It’ s not just an anchor store or two. It’s a lifestyle center.”

Innovators succeed

One of the reasons for Easton Town Center’s success? Peterson says that the mall’s operators have made a priority out of inviting local retailers, restaurants and business owners to set up shop here.

This means that there are certain products that consumers can only find in this mall. They won’t find them at the strip center two miles away.

“There has to be something unique about your shopping mall today,” Peterson said. “If there’s not, there’s no reason for shoppers to go there. They can find everything you’re offering somewhere else.”

Di Santo agreed. The way mall operators once ran their enclosed shopping malls isn’t working today, he said.

“Operators have to find something new and interesting for their malls to succeed,” he said. “The definition of insanity is to do things the same way and expect a different result. Too many mall operators have done that, and too many malls are failing because of it.”

Di Santo says that his company has worked with too many mammoth regional malls that, he says, look like prisons.

It’s important for operators to open these gloomy spaces up, Di Santo said, to add glass and green elements inside them. High-end restaurants are a necessity. Consumers are no longer are satisfied with cheap Chinese food or fast-food offerings in food-court settings. They want destination restaurants.

And they want plenty of entertainment options, too. Movie theaters are important. But successful malls are also offering jump zones filled with inflatable bounce houses for children, train rides for their youngest visitors, bowling alleys and high-end arcades designed for adults.

round1

Round1 facilities can add life to struggling malls.

Di Santo points to Round One Entertainment as an example. The company operates 30,000- to 40,000-square-foot bowling alleys and video arcades in malls across the country. The entertainment centers also include restaurants, karaoke, darts and ping pong tables.

A new Round One facility is scheduled to open this year at the Yorktown Center mall in the Chicago suburb of Lombard, and Di Santo expects it to provide a boost to this already busy mall.

Di Santo has more advice to mall operators on how to make sure that their malls don’t die out. But, he says, the keys today boil down to this: Mall operators need to bring in more amenities and unique stores to attract shoppers. And they need to realize that the lines between online shopping and brick-and-mortar shopping are becoming increasingly blurred.

“Brick-and-mortar stores and malls will never die,” Di Santo said. “There are still many people who, when they make purchases, want to feel what they’re buying. They want to touch it and try it on. A lot of stores today are using their physical spaces as a showcase for what they have. If they leave the store and then buy the items they’ve tried on online? That’s OK. The retailer is still making its money.”

Here are some other suggestions Di Santo has for mall operators:

  • Re-purpose that anchor space: There was a time when most malls were developed to support four or more anchor stores. Today, though, many regional shopping malls struggle to bring in enough shoppers to support so many large retailers. Di Santo’s advice? It might be time to re-purpose some of that anchor space, perhaps by bringing in new restaurants or entertainment options to a vacated big-box space. It might make sense for more shopping malls to support just two large anchor stores instead of four or more.
  • Study the tenant mix: There was a time when malls could support smaller mom-and-pop shops. Today, that is increasingly unlikely, Di Santo said. Mall operators today need to bring in proven national retailers. It’s the big names that bring in the big dollars.
  • Don’t forget the kids: Children’s entertainment centers — places for kids to play while their parents take shopping breaks — might not generate money directly, Di Santo said. But they can encourage parents to spend more time at the mall. And that can only be good for mall operators.
  • Dry those fountains: Giant water fountains have long been a staple of shopping malls. But they don’t generate any money (unless you plan on jumping into them to remove those pennies and dimes). Di Santo recommends removing such decorative touches and instead adding small coffee shops or food stations. Both of these could generate more income for a mall.

Don’t forget technology

Technology is also becoming an increasingly powerful tool to attract shoppers. Meyar Sheik, chief executive officer of San Diego’s Certona, which helps retailers use mobile technology to better connect with shoppers, says that malls that use tech to personalize shopping experiences for customers will gain an advantage.

That sounds complicated. But it comes down to this: Say a customer is walking through a mall. That customer steps past a sporting goods store. Suddenly, the customer receives a text stating that a specific running shoe is on sale inside the store. That might cause the customer to step into the store and make an impulse buy.

This works because the sporting goods retailer already knew that the customer liked a certain brand of shoe.

“This is particularly powerful,” Sheik said. “If a customer already has a relationship with a retailer, these retailers can use that information to encourage more purchases.”

What if another customer walks past a pet store in the mall? The store can send a message to the customer’s smartphone that a particular brand of dog food is on sale. The customer might then remember that the dog food bag at home is running low.

“I can’t tell you how many retailers or malls are using technology like this,” Sheik said. “The tech is still so new. But in the future, we will see more of it. And it will become increasingly important to retailers.”

Technology such as that offered by Certona helps retailers track what individual customers spend the most time looking at on retailers’ Web sites. Analyzing this information, Certona can then help retailers predict what other products customers will also like.

Retailers can use this information to send personalized sales pitches to the e-mail addresses or smartphones of their customers.

“Based on big data and analysis, we can see what products you looked at and predict what you are going to look at next,” Sheik said. “In a physical store, determining this information is challenging.”

Sheik says it’s all about making connections with consumers. Say a shopper likes a certain author. A book seller can send that consumer a message when that author happens to be in town for a book signing.

“It goes beyond shopping,” Sheik said. “It’s about making shopping more fun, entertaining and social. It’s like it was in the old days. When I was growing up, before the Internet, we’d hang out at the mall. That was what we did. Now people are staring into their phones. We’ve become the look-down society. But retailers can use consumers’ connection to their devices to make the shopping experience more of a social, personalized event. And that will only help.”

Sprucing up a Michigan mall

Macomb Mall in Roseville, Mich., is going through its own transformation today. The mall is of the age — it is now 50 years old — that requires changes.

The iconic sign at the Macomb Mall has beckoned shoppers for 50 years.

The iconic sign at the Macomb Mall has beckoned shoppers for 50 years.

One of those changes? Mall owner and manager Lormax Stern Development Company — which purchased the mall in 2013 — is reaching out to new retailers to add spice to the shopping experience here.

There have been some successes. H&M, the Sweden-based fashion retailer, has signed a lease at the mall. It will open its 20,000-square-foot store in the fall of 2015.

Other retailers at the 901,319-square-foot mall are planning their own renovations or have signed lease extensions. ULTA, a 10,000-square-foot cosmetics superstore, recently signed a lease at the mall. Shoe Carnival, GNC and Dick’s Sporting Goods have all either signed new leases or committed to renovations.

And Champs Sports, an athletic apparel and shoe retailer, is now in the middle of expanding its store by 1,500 square feet.

Christopher Brochert, partner at Lormax Stern, says that the mall is an important destination point for this slice of Michigan. And, he predicts, it will remain that way for years.

“Macomb Mall has a roster of tenants that are dedicated to the growth and success of the shopping center,” Brochert said. “Through the loyalty of our retailers and their constant innovation, the mall will serve as a vibrant neighborhood resource and shopping destination.”

 

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