There are many malls in the United States, comprising a significant portion of the retail real estate landscape. Of just under 1,100 malls, quite a number are are facing severe challenges, and simply shouldn’t remain as malls; others still have a legitimate and even vital role to play in the overall retail environment.
Yes, traditional mall anchors such as major department store chains are going through a period of significant readjustment, and traditional smaller tenants such as apparel merchants are facing challenging times, or disappearing altogether. At the same time, new less traditional tenants are seeing the advantages of leasing mall space – notably health services and entertainment venues for all ages – and major retailers who have had no, or little, mall presence are looking at vacant mall anchor space in a new way. Target, for example, has been aggressively opening smaller format stores, and this effort has led them to consider space they might not have considered before. And, ironically, retailers who started with an on-line presence, are, in some cases, trying out bricks and mortar too. Owners and managers need to manage and lease carefully for the new retail environment – and sometimes reimagine their shopping center.
In our work on a number of malls of various sizes, for a variety of clients including special servicers, we’ve encountered many of the challenges facing mall owners everywhere, and helped guide our clients’ efforts through renovation, remerchandising, or complete redevelopment. We oversaw the building of a full-sized skating rink within a mall we worked on in upstate New York – shifting the mall toward an entertainment destination years before this became a trend. Another New York mall in our management portfolio is in the final stages of “de-malling” into a much more robust center. The Latham Circle Mall was a 650,000-square-foot enclosed mall with Lowes, Burlington Coat Factory, JC Penney, and a 10-screen theater. What exists today is a 500,000-square-foot open air center with a 185,000-square-foot Walmart SuperCenter, Bob’s Furniture, Lowes, and Burlington. The final 45,000 square foot phase will be under construction in the spring of 2018. We’ve shepherded malls through the process of being demolished and reborn. We’ve also helped move them toward revitalization.
The Bon-Ton, one of many venerable department store mall anchors now closing stores in these difficult times, announced this month that it will close its 60,000 square foot store at UMall. As you may have heard, our team has negotiated a lease with Target to open at UMall in the space that had been occupied by The Bon-Ton. This is major news because Vermont had been the only US state without a Target store. As Target noted in a release: “Target’s strategic priorities include reaching guests in new ways by expanding small-format stores in dense suburban and urban neighborhoods, as well as near college campuses. With Target’s small-format stores, assortments are tailored to meet the needs of local guests. The Vermont store will provide neighboring residents and University of Vermont students in the Burlington area a quick-trip shopping experience.”
Construction of the new Target will begin in early 2018, with a Fall opening projected. The much-anticipated Target will become the centerpiece of an ambitious plan to re-merchandise UMall. Our team has negotiated many leases at the mall including L Brands to expand and relocate the Victoria’s Secret and Bath & Body Works stores. Many other potential new leases are being considered.
With Target and other retailers adapting their store sizes and expansion parameters, and the rise of non-traditional tenants such as grocers and other large-scale entertainment operators, as well as health care, service providers, and others, many malls (although not all), may not be down for the count. We’re keeping a careful eye on US malls and their future, and we’ll share our mall data, news, and experience with you in much more detail in the coming months, starting with the addition of a section of this newsletter dedicated to mall news. Stay tuned!
Chris Cardoni, Marketing Manager
CCardoni@KeyPoint Partners.com
