"You had this enormous increase in space without a corresponding increase in consumer demand," said Carl Steidtmann of Management Horizons. "There was an explosion in all types of retail space, but we felt the mall space was most overbuilt and the most vulnerable to the changes in shopping."
And there you have the beginning of the “Demalling of America.” The heyday of mall development was over. That’s why we’re still talking about “B” and “C” malls today, and the conversion of some of them to non-retail uses.
Just this month, an article in Yahoo! Finance examined how those B and C malls suffer when long-time major tenants such as Sears and JCPenney race to close stores. Nearly half of the 1,050 indoor and open-air malls in the U.S. have both of those struggling chains as anchor tenants, according to real-estate research firm Green Street Advisors. Every closing of one of these anchors results in a loss of foot traffic and inevitably a loss of smaller mall shops. Green Street Advisors notes that one-quarter of Sears and JCPenney-anchored malls have mall shop sales productivity of less than $300 per square foot, an established benchmark in determining the long-term viability of malls.
In an article from this month’s Shopping Centers Today, mixed-use development designer Yaromir Steiner makes some insightful comments regarding A, B, and C malls. He describes A-level properties as “want-based” centers that include experiential and aspirational tenants. He goes on to define B and C malls as “need-based” centers with little to no upside potential. Based on regional accessibility and demographic profile, Steiner thinks that only 25% of the several hundred B and C malls that remain in the U.S. offer redevelopment opportunities to bring them back to A-level standards.
In Eastern Massachusetts, Natick Mall, anchored by Nordstrom, Neiman-Marcus, and Macy’s, and complemented by a cache of high-end retailers, is a good example of a want-based center. Tenants such as Apple, Louis Vuitton, Tiffany, Bose, Anthropology, Madewell, Lego, and American Girl all offer compelling reasons for even the discerning shopper to simply walk in and explore, even without a specific need in mind. Other malls in the area that fit this profile include Burlington Mall in Burlington, Northshore Mall in Peabody, and South Shore Plaza in Braintree, all of which have undergone major remerchandising in recent years which included the addition of a Nordstom department store. Not only is the merchandising at these shopping centers now second to none in suburban Boston, but their regional accessibility to some of the most affluent sectors of the metropolitan area is excellent.
Two of these malls, Independence and Silver City, were built in 1988 and 1992, at the tail end of mall development in the region. Since that time all malls everywhere have been adversely impacted by what’s happened around them, with big box stores, value-oriented retailers, and lifestyle/hybrid shopping centers (to say nothing of shifting customer demographics and the onslaught of ecommerce) all contributing to the erosion of their market share.
High quality, aspirational, want-based centers such as Natick Mall, Northshore Mall, South Shore Plaza, and Burlington Mall are better positioned to absorb those impacts. The old saying about “location, location, location” has never been more true. These A-level products put their stakes in the ground in the 1950s and 60s, during the era of the birth the regional mall, and have evolved from their original formats to what they are today. One could say they’re not getting older, they’re getting better.
The same can’t necessarily be said of smaller, need-based B and C malls. As the overall retail industry continues to change at a more and more rapid pace, as the Sears and Penney closures proceed and likely accelerate, and as we await the next major-tenant-multiple-store-closing shoe to drop, the fate of even that small percentage of marginal malls that have a chance at redevelopment remains very much to be seen.