Skip to main content

Mall for One and One for Mall

It’s a turbulent time for many American malls, and several owners and operators have had success reversing the fortunes of underperforming malls by transforming them into mixed-use destinations. This can radically change a mall’s fortunes – particularly those with great locations and favorable demographics – but it is not a magic bullet. Mixed-use redevelopments take time. They come with design and development challenges, new value calculations, and complex economic, demographic, and leasing considerations.

For retailers, the process can be extremely beneficial, but also incredibly disruptive. They need to be attuned to the signs that a redevelopment is needed and cognizant of what they can do to navigate the process once it begins. Ultimately, they need to envision what the “new” mall will look like and what their roles will be in the new space. Recognizing when a mixed-use solution is a possibility, what to do when it happens, and what results can reasonably be expected are musts for strategically minded retail executives.

What to look for
Declining sales. It seems obvious, right? But the signs can be surprisingly easy to ignore. Given inflation, a steadily growing economy and continuing population growth, your sales should be going up. If numbers in your store and in the overall mall are decreasing – or even just stagnating – that’s a red flag that a change is in order.

Anchors away. Do a critical analysis of how your anchors are performing and how they are calibrating their brands to marketplace changes. Large anchors in general (particularly traditional department store anchors) have generally been slower to respond to the nuances of an evolving marketplace. Some have been more successful than others, and some have moved in the right direction, but simply selling products online does not make you an online retailer. Walmart’s online platform and digital infrastructure proves that reinvention is possible, but for every anchor brand able to reinvent itself there’s another on a glide path to irrelevance. Learn to recognize the difference and understand what it means for your mall.

Demographic erosion. This is a big one. If the demographics have abandoned you, almost nothing you do will matter.

What to do
Practice what you preach. It’s one thing to be critical of brands and businesses that are slow to evolve in a changing marketplace, but, first and foremost, retailers need to be focused on their own growth and carrying their own weight. Retail executives and decision-makers must be cognizant not only of their own efforts to bolster their digital profile and integrate e-commerce, but to appreciate what needs to happen in their brick-and-mortar locations to complement those efforts. Some retailers are being more creative and aggressive than others, pushing to integrate new services and technologies like virtual dressing rooms, in-store pickup and ordering, and next-day delivery for items/options that are out of stock in the physical store.

Right-size your shop. Stores can get smaller, but that’s not necessarily a bad thing, especially as smarter inventory management and online sales and ordering integration come on-stream. Retailers can end up with less square footage, but sometimes less is more–provided there is sufficient consumer traffic in the mall and in the store. As many retailers have learned firsthand, one of the best ways to generate that traffic is by leveraging the social and commercial synergies of new and different uses, notably dining, hospitality, and entertainment concepts.

What to expect
Disruption. Any comprehensive mixed-use redevelopment will be disruptive. That can manifest itself in lower foot traffic and lagging sales or, perhaps, even a temporary closure. Owners and developers may need to shift tenants to a different part of the mall – either to accommodate construction or as part of a permanent new reconfigured space. Relocation issues are not uncommon, and some tenants may work to negotiate rent reductions or short-term deals.

A mixed-use renovation or redevelopment can be an expensive and time-consuming undertaking. When you factor complications such as the need to potentially secure anchor approvals or negotiate anchor buyouts, things can get tricky very quickly. Retailers should have realistic expectations about timelines going into the process, and should be willing to be patient, and flexible – while still protecting their interests.

In the near-term, developers setting out on a renovation or redevelopment are looking for as much revenue as possible. Consequently, they may be more willing than usual to agree to short-term deals. The long-term strategy, however, is likely to be very different. Mall owners and operators work closely with developers and consultants to figure out how to reposition the asset, and how to build a vibrant and dynamic tenant mix that makes sense and is sustainable over the long run.

For their part, retail executives need to carefully and critically consider their place in that future, not only asking “Do I want to be here?” but also “Are they going to want me?” Sometimes what is best for all parties is the same retail brand, but a different concept: perhaps switching to an outlet store or discount model. In the end, quality mixed-use renovations and redevelopments are not just about compromises, but also opportunities. A restaurant tenant having the opportunity to expand out and create a patio or outdoor dining area is the kind of move that could liven up the public space in the newly redeveloped mall and boost sales for the retailer – the kind of win-win outcome that every mixed-use transformation tries to achieve.

A registered architect, John Schupp implements retail center renovation plans for the development services team of Avison Young. Stephanie Skrbin, a principal at Avison Young, is recognized as one of the top retail brokers in Southern California.

This ad will auto-close in 10 seconds