Now Trending: The Replacements
There has been a great deal of discussion and analysis in recent years regarding the ongoing struggles of many traditional department store giants. Brands like Sears, J.C. Penney and Macy’s are scratching and clawing to continue to stay afloat, together with a number of big-box retailers that are also struggling to remain competitive in an evolving retail marketplace.
As more and more department stores and big-box locations go dark, owners and developers are faced with large gaps in shopping centers that need filling. The challenge is not just making up for lost square footage, it is in accommodating large formats and suboptimal layouts, and finding uses and tenants that add something new to the existing center. There have been a number of solutions to replace these fallen giants – strategies that have met with varying degrees of success – from redevelopment and restructuring, to backfilling with new and emerging retail concepts. Perhaps to consider the best fit for today’s marketplace is to reflect on what past solutions have emerged successfully and, in some cases, not so successfully.
Regardless of the specific strategy, it’s clear that owners and developers need to think strategically and creatively about how to fill those large, open spaces in their centers. But is that happening? Are new options being put in place because they work, or because they are simply available?
I think the biggest issue isn’t about tenancy or square footage–it’s actually one of perspective. You can’t prescribe the right solutions if you don’t fully appreciate the nature of the problem.
To do that, we first need to trace the struggling department store trend to its origins. The way many talk about these issues, you might think this has all just popped up out of nowhere in the last few years. But the idea of a mall losing its anchors isn’t new. The reality is that what is taking place in the industry today is the culmination of developments that have been percolating for at least twenty years. Prior to the acceleration of the department store and big-box struggles we have seen in recent years, the last time the decades-long trend experienced a spike was the late 1990s and early 2000s, when an economic slowdown cranked the Darwinian vise that was already applying pressure to a few extra notches.
Examples of adaptive reuse that emerged in the wake of that trend include medical and educational uses, some of which were successful – like the addition of a new offsite campus for the Vanderbilt medical center on the second floor of the 100 Oaks Mall in Nashville, Tennessee – and others that didn’t work out – such as the attempt at adding a community college facility to the University Mall in Tampa, Florida.
Today, the industry is focused on looking at alternative retail and entertainment concepts, along with multifamily and hotel. But the “right” solution is about understanding what works for each specific shopping center. Some of the conventional wisdom today was barely on the radar just a few short years ago. Unfortunately, that’s a continuation of a long-term pattern that has plagued the industry: the next big thing comes along, everyone jumps on board until the bubble pops – and then on to the next next thing! History has taught us that we have to be extremely careful about evaluating an asset from a local and regional demand perspective.
While many centers that are losing anchors are turning to new experiential entertainment components, many of those concepts are unproven and may face their own issues adapting to social changes. These concepts are increasingly popular when it comes to filling these large available spaces. But will they bring new visitors? Will they get them to stay longer? And is it a cross shopping opportunity?
Knocking down a vacant anchor and replacing it with new restaurants and a selection of specialty retail has also worked–to a point. But even that can easily become oversaturated. Food uses are not a panacea for a mall – they have to be one of a number of strategies when it comes to potential redevelopment opportunities.
We tend to go from one potential fix to another in a very global sense, at times losing sight of on-the-ground elements that can and should play a critical role in decision-making. That’s not to say that any of the solutions discussed above can’t work – many can and will work very well – but each case has to be studied very carefully. Context is so critical. Understanding each individual market: what are the voids in the market–and how can you fill them? And that assessment needs to encompass not only the retail marketplace, but also the voids that exist in other commercial and residential segments.
Today, the retail real estate industry is doing what it always does: looking for an answer and searching for a formula. The reality is that there isn’t one–at least not a one-size-fits-all variety. Customers don’t shop that way. They only respond to what they want and need. When it comes to solutions, creativity and analytical rigor is key. However, when a mall is repositioned long term, it has to fit its market — taking into account everything from demographics to future growth potential and finally to the changes likely to occur in the retail consumer, both short and long-term.
Retailers and retail real estate developers need to avoid making the same mistake that the department stores they are replacing made–the mistake that contributed to their downfall in the first place: inflexibility, and an inability or unwillingness to adapt. The last thing you want to do is to solve a problem caused by a failure to abandon an outdated formula by being too formulaic.
Jeff Green, president and CEO of Jeff Green Partners, combines more than 30 years of retail industry experience to provide comprehensive consulting services to national retailers, developers, shopping centers and health care facilities. The firm specializes in shopping center feasibility, distressed center repositioning, retail real estate planning and investing, medical retail consulting, retail expansion planning, location analysis, commercial land use and urban redevelopment. To learn more, visit Jeffgreenpartners.com or connect with Jeff at [email protected].