With restaurants and bars now occupying upwards of 25 percent of space, mall owners are struggling to identify new opportunities to stem their decline. There is growing recognition that to compete with vibrant downtowns and online shopping, malls will also need to add hotels, apartments, and entertainment to create attractive mixed-use neighborhoods.
More developers are finding new opportunities in underutilized malls and empty storefronts with mall retrofits.
“Tearing down these properties often makes less sense than finding new uses appropriate for an era when consumers shop so much online.
“A lot of these projects are at Main and Main streets,” says Najla Kayyem of Pacific Retail Capital Partners, “and great locations don’t go out of style.” Pacific Retail Capital Partners recently decided to step in as the operator of Independence Center, an iconic lifestyle shopping center in Independence, MO, just outside of Kansas City.
“We want people in the area to be proud of their center,” Kayyem says. She echoes the thoughts of many people currently developing or renovating retail centers in that these spaces need to provide experiences “that really create a community environment.”
“CEO Eddie Lampert said that its lenders and vendors must have a better outlook about the company’s future… and that negative outlook is putting Sears at a competitive disadvantage.
Lampert again insisted that the company is on course to turn a profit in 2018. But he also ominously warned that the company’s board will “consider all other options to maximize the value of Sears Holdings’ assets” if the company can’t refinance its debt.
Sears (SHLD) closed hundreds of stores last year, leaving it with just over 1,100. Last week it announced plans to close another 103 Kmart and Sears stores by April.”
Consider retrofitting the stores and malls through Sprawl Repair to save jobs, create livable communities and boost the investment returns.
“General merchandise stores, the segment that includes department stores, were hit the hardest, losing 90,300 jobs.
These job losses tend to hit the young, elderly, women and minorities the hardest. About 60% of department store employees are female, compared to 47% of workers overall. Minorities, the elderly and teenagers are also far more likely to find jobs in department and discount stores than they are elsewhere. Teenagers hold 8% of department store jobs, compared to 3% of jobs overall.
In 2017, 7,000 store closings were announced, a record that was more than triple 2016’s number. And the trend will undoubtedly continue in 2018. Sears Holdings (SHLD), owner of both Sears and Kmart, said Thursday it plans to close more than 100 additional stores.”
It is more important than ever to diversify our economy and opportunities through sprawl retrofits and mall repair that supports all of our citizens.
The giant retail mall operator, Westfield, is being purchased by French property giant Unibail-Rodamco, to remain resilient in the face of the changing retail market. High-end markets remain their target. Agility and diversity will be key for retailers and their employees who continue to bear the burden of the changing retail climate. Communities that promote mixed-use mall repairs may have a chance to combat the sliding economy.
“The acquisition of Westfield is a natural extension of Unibail-Rodamco’s strategy of concentration, differentiation and innovation. It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States.”
The Lowy family will retain control of Westfield’s retail technology platform, OneMarket, which will be spun off into a new company on the ASX, with Steven Lowy remaining as chairman.
Westfield Corporation runs 45 shopping centres and airport retail precincts in the US, UK and Italy, including the retail space in the new World Trade Centre in New York.
Retailers across the United States are in what appears to be terminal decline as shoppers abandon traditional bricks and mortar while the digital revolution lays waste to traditional shopping.
That, in turn, has begun to harm shopping malls as retailers have struggled to pay rents with many closing down their outlets.
Thousands of mall-based stores have shut their doors across the US this year, including stalwarts such as JC Penney, Macy’s, Sears and K-Mart reducing their physical footprint.
That, in turn, has begun to affect employment. Until as recently as two years ago, shopping malls were providing America with 200,000 extra jobs a year, but that trend has now suddenly reversed.
According to the latest Bureau of Labour Statistics, the retail industry has lost an average of 9,000 jobs a month this year. This time last year, malls provided jobs growth of around 17,000 a month.
Contrary to the current Retail Meltdown from excessive retail outlets and online competition, the dollar store model – simplified offerings to meet basic needs, no-frills buildings or service, and continued investment in markets that show good returns – appears to be attractive to low- and high-income shoppers, as well as to investors. They fill a need, especially in more rural markets.
Dollar General is bucking the retail trend.
By the end of the year, more than three in four Americans will live within 5 miles of a Dollar General, the company noted on the call.
Shares of Dollar General (DG) have climbed 25% this year. Dollar Tree (DLTR), its top discount competitor, has risen 38%.
Dollar General has succeeded thanks to its lean business model, said GlobalData Retail analyst Neil Saunders. Its smaller stores sell cheap day-to-day essentials, especially in rural areas where it doesn’t make sense for Walmart or other large retailers to open up shop.
“The company [is] the closest and most convenient general merchant for millions,” said Saunders.
Sales were up 4.3% last quarter at stores that were open a year ago, a sign of retail health. Revenue last quarter ballooned to $5.9 billion — an 11% uptick from last year — in part from hurricane-related spending in Texas and Florida.
More middle income and affluent shoppers are helping lift Dollar General’s overall sales. The expansion, especially in metro areas, will allow it to continue reaching these shoppers, said Saunders.
But lower-income Americans remain the store’s primary customers. The stores attracted shoppers during the economic downturn in 2008 and 2009, and consumers haven’t stopped coming back since, even as the economy has picked up steam.
As American malls are failing, Latin American malls seem to be thriving. Social and economic factors appear to be the key. The good news for American retailers is that those who retrofit based on the resurgent Main Street model will be best positioned to capitalize on changing trends.
“…fear of violent crime and a relative lack of high-quality urban environments are also factors in the Latin American mall boom … malls provide a safe place to shop, and mall managers invest heavily in security. Combine this with the lack of reliable mail and home delivery service that hampers the e-commerce sector and there isn’t much competition for Latin America’s rising middle-class shoppers.
In most U.S. cities, on the other hand, violent crime has fallen dramatically over the last 25 years, and walkable urban neighborhoods that boast restaurants, bars, salons, and “experiential retail” are thriving. In this sense, the decline of the North American mall reflects a positive trend: The Main Streets that malls once menaced are coming back. Such amenity-laden neighborhoods are also in a better position than suburban malls to fend off the threat of online shopping.
In the U.S. and Canada, malls are still overwhelmingly anchored by major retailers like Sears, JC Penney, and Macy’s. And as the fortunes of these department stores have declined, they’ve dragged the malls they’re attached to with them. In Latin America, on the other hand, a whole variety of businesses act as anchors. Grocery stores are common in Latin American malls and are often situated at the end of long corridors lined with smaller shops, creating a steady flow of foot traffic.
When we feel nostalgia for malls, maybe what we’re really feeling is nostalgia a time when incomes were rising and the quality of life of average people was improving.”
As American malls continue to drown in a sea of asphalt and suburban sprawl, traditional retailers are seeking options that will help them weather online retail competition. Almost side-by-side, Nordstrom is trying out a 3,000 SF showroom concept to compare with their 122,000 SF Nordstrom department store, in an upscale stretch of Melrose Place in Los Angeles.
“Brick-and-mortar retail chains, known for sprawling stores that stock a bit of everything, are trying to lift sagging sales using a different strategy: cozier spaces that sell very little of anything.
Instead of slashing prices and accelerating delivery times, praying for fickle customers to stay loyal, many retailers are aiming higher, to become a desirable place to shop.
Retailers are experimenting with small showrooms with few or no products, but often with impeccable customer service, as they try to compete with e-commerce companies.
“People don’t have to go to stores anymore; they have to want to go,” said Lee Peterson, an executive vice president at WD Partners, a strategy, design and architecture firm.”
Mall Repair and Sprawl Repair are aimed at creating lean, flexible retail outlets that can weather the turbulent retail market.
In another example of retrofit to manage the new retail reality, Ginia Bellafante wrote that WeWork is paying $850 million for Lord & Taylor’s 676,000SF Italianate building in Midtown NY, which it has occupied since 1914.
“…it stood not merely as a monument to turn-of-the-century commerce but also as the grand testament to what the sociologist Thorstein Veblen called the rising culture of “conspicuous leisure.” Leisure, Veblen wrote, “does not connote indolence or quiescence.’’ What it conveys is the “nonproductive consumption of time… any time spent away from the activity of labor.”
“Lord & Taylor will rent a quarter of the building, maintaining a smaller version of itself. WeWork will take over the rest for its headquarters and the leasing of shared office space — and tutorials perhaps for what is supposed to count now as a good time.”
WeWork looks to, “build an entire social life around the WeWork experience.”
Derek Thompson’s article for CITYLAB describes the rise and fall of Sears, and a cautionary tale for Amazon. As the retail climate continues to shift, Sears’ properties, along with real estate holdings liberated by Macy’s and others during the retail meltdown, offer prime opportunities for sprawl repair that can lead to complete and walkable communities.
“There are four broad lessons that Amazon can glean from the story of Sears’s decline.
- First, retail is in a state of perpetual metamorphosis.
- Second, even large technological advantages for retailers are fleeting.
- Third, there is no strategic replacement for being obsessed with people and their behavior.
- Finally, adding more businesses is not the same as building a better business.
But it’s important for Amazon to stay aggressive about experimenting with new platforms, in case one of today’s underdeveloped technologies—like ordering through AI assistants, delivery-by-drone, or virtual and augmented reality—turns out to be the next big thing that transforms retail, all over again.”
Like retail, it is important to be agile and creative in designing new communities and repairing suburban sprawl to meet the changing needs of Millennials and Baby Boomers.
The retail meltdown due to online competition and an overabundance of physical stores is now being experience world-wide. Retailers intent on survival will need to be lean, flexible and creative to stay competitive. But it will require more than just department store chains to participate in finding solutions for failing malls.
“STB assistant chief executive Lynette Pang once said: “In today’s fast-changing tourism and consumer landscape, we cannot stay still.” It is therefore crucial for landlords, retailers and relevant government agencies to think “out of the box” to allow new brands and exciting concepts to flourish and take shape.
Increasingly, the experiential factor is key in making a difference to Singapore’s retail scene. Shopping malls can reinvent themselves with unique experiential retail spaces that set them apart from the mainstream. For example, the opening of Jewel Changi Airport in early 2019 will distinguish itself as home to Singapore’s largest indoor garden and the world’s largest indoor waterfall, featuring a light and sound show every night to enable visitors to shop, dine and play in one place. The new Funan DigitaLife Mall, set to open by end-2019, will be the first commercial building in Singapore to allow cycling through the building, and have rooftop farms that offer visitors a rest from the urban crowd.
With such unique and activity-based retail zones, landlords are better able to make their retail spaces break out of the homogeneity among retail malls.