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Buh-bye, Sears. Hello, T.J. Maxx, Wegmans and karaoke fun.
As retailers struggle and perish in the era of digital shopping, malls are losing their longtime department store anchor tenants, and in turn, getting a new lease on life. Literally.
It’s not just the massive anchor spaces that are getting a makeover.
The spate of closures among smaller in-line chains from Abercrombie & Fitch to The Children’s Place have landlords rethinking and repurposing the entire mall to boost productivity and woo younger shoppers with fresh retail blood. New tenants include upscale supermarkets, off-price merchants and e-commerce startups, as well as experiential fare like celebrity-chef restaurants and bowling alleys.
But this narrative that retail is dying doesn't tell the whole story. “It masks the fact that many shopping districts are doing very well, [mall] occupancy rates are at record levels and rents are in the stratosphere,” said Andrew Nelson, chief economist for commercial real estate firm Colliers International.
Garments And Groceries
The tenant shakeup is poised to redefine the very look and feel of malls across the country, where department stores, traditionally considered a shopping center’s signature draw, have loomed large via grand spaces.
But declining sales, foot traffic and productivity have flipped the perception of anchor tenants saddled with underperforming locations like Macy’s, shuttering 100 stores, J.C. Penney, closing about 130 units, and hanging-on-a-thread Sears, dumping 150 spots, from an asset to a liability.
Primark, Ireland's fast-fashion chain will replace part of a former Sears store in Brooklyn's King Plaza Mall. (Photo by Lisa Lake/Getty Images for Primark)
In some malls, anchor tenants will cease to exist, replaced with a mix of smaller specialty shops, and a selection of goods and services, from movie theaters to fitness centers and organic grocers, analysts said.
Meanwhile, e-commerce (translation, Amazon) is wrecking havoc on legacy apparel retailers from Sears to the string of specialty chains that have been falling like dominoes in recent months, from American Apparel and The Limited to Bebe.
The exodus is clearing a path for today’s hottest clothing merchants: off-price and fast-fashion chains. Fast-fashion chains Ireland’s Primark and Spain’s Zara will replace a Sears spot at Macerich's Kings Plaza Mall in Brooklyn, New York, which is billing its redevelopment as emblematic of the borough’s “diversity and cutting edge cool.”
And it’s out with the old, in with the new at the redeveloping Hickory Point Mall in Forsyth, Illinois, where a Limited has shuttered its doors for good, and a new 26,000 square foot T.J. Maxx debuts this fall.
Online-only retailers are “another area of [mall] growth,” said Todd Thomas, equity research analyst at KeyBanc Capital Markets. This month, plus-sized online merchant ELOQUII opened its first brick-and-mortar store at the Fashion Centre at Pentagon City Mall in Arlington, Virginia, following in the footsteps of eyewear shop Warby Parker and menswear merchant Bonobos, online-first retailers that have been opening physical stores.
The health-and-wellness movement and millennials' taste preferences are bringing upscale grocers to traditional malls.
Mall developers have typically considered supermarkets and fashion chains unseemly bedfellows, but that notion is fading. At Boston’s Natick Mall, gourmet supermarket Wegmans will debut next year in a former J.C. Penney anchor space, for one.
Games And Gourmet Gastronomies
At the same time, malls are moving beyond simply hawking stuff to selling lived moments, from a foodie-worthy meal to a game of ping-pong, as consumers divert more discretionary income from material things to experiences.
The trend is pronounced among millennials, who’ve displaced baby boomers as the nation’s biggest buying group — and retail real estate players are paying attention.
The current wave of store closures presents “an opportunity to bring in new entertainment concepts and restaurants" in line with demographic shifts, Thomas said. Over the last decade, dining options have boasted the biggest square footage increase at retail real estate investment trusts (REITS) Taubman, Macerich and CBL & Associates’ mall properties, from quick-service restaurants to chef-driven concepts, and that’s only poised to continue, he said.
James Beard Award-winning chef Michael Mina, for one, will headline a gourmet food hall at Beverly Center, dubbed The Street. It's part of a $500 million redevelopment of the Los Angeles mall “for the next generation of Angelenos,” according to a press release from owner Taubman Centers. Mina conceived the project, which will have 12 to 14 food and beverage stalls, as well as a restaurant and rooftop bar.
Fun is also on the mall menu.
Come fall 2017, a shuttered Sports Authority store will be the site of Round 1 Bowling & Amusement at Great Lakes Crossing Outlets in Auburn Hills, Michigan. The amusements in store range from bowling and billiards to darts, arcade games, and Karaoke.