Tenants leaving mall for Power Centers

cjd
Assistant Store Manager
Assistant Store Manager
Posts: 624
Joined: August 18th, 2018, 6:54 am
Has thanked: 3 times
Been thanked: 6 times
Status: Offline

Tenants leaving mall for Power Centers

Post by cjd »

Mall locations moving to shopi g centres.

I’ve noticed lately that mall tenants seem to be moving to the newer power center here. This center contains the discount stores like Ross, Marshall’s, Burlington that seem to always be busy now.

Last year Batg and Body Works opened on this center, but it kept both locations open for a period of time before closing in the mall.

Then about a month ago I noticed Hibbett Sports was closing in the mall. I thought it had gone for hood, but then I happened to notice a few weeks ago it moved into a space next to the new Five Below. I don’t know how long it had been there, as it’s barely even noticeable, with just a foot and one window on its facade. The store is much deeper than it is wide. It just doesn’t look as attractive as it did in the mall and it seems the selection is smaller.

I wonder if Rack Room and GameStop would like to leave the mall? With GNC gone they’re the only non anchor chains left there.
ClownLoach
Valued Contributor
Valued Contributor
Posts: 2698
Joined: April 4th, 2016, 10:55 pm
Has thanked: 40 times
Been thanked: 289 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by ClownLoach »

cjd wrote: December 26th, 2022, 7:06 am Mall locations moving to shopi g centres.

I’ve noticed lately that mall tenants seem to be moving to the newer power center here. This center contains the discount stores like Ross, Marshall’s, Burlington that seem to always be busy now.

Last year Batg and Body Works opened on this center, but it kept both locations open for a period of time before closing in the mall.

Then about a month ago I noticed Hibbett Sports was closing in the mall. I thought it had gone for hood, but then I happened to notice a few weeks ago it moved into a space next to the new Five Below. I don’t know how long it had been there, as it’s barely even noticeable, with just a foot and one window on its facade. The store is much deeper than it is wide. It just doesn’t look as attractive as it did in the mall and it seems the selection is smaller.

I wonder if Rack Room and GameStop would like to leave the mall? With GNC gone they’re the only non anchor chains left there.
Many mall retailers are trying projects like this. Gap and all of their subsidiaries, Victoria's Secret, Bath and Body Works, Foot Locker, etc. The problem is that they don't have the capital to move all of their real estate, build the stores from scratch etc. Cost structure, especially common area maintenance is charged and handled differently in ways these businesses are not normally equipped for. Leases are very different. Malls have anchor agreements, a dinosaur of the past where department stores used to be trusted to bring tens of thousands of customers daily. In those anchor agreements the mall tenants are entitled to dramatic and drastically reduced rents if any department store closes. Name a mall where they haven't closed? So many of these mall tenants are paying much less rent than they used to in the past. The reduced rents are then enabling merchandise brands to open more direct to customer stores in the malls, further eroding the department store business. It is entirely possible that in some cases the rent out of the mall in a nearby power center may be more expensive. The death of malls is a real thing, but it is not happening to every mall, just the "C" ones that are overshadowed by better regional malls. If the mall is a surviving "A" or "B" mall then it is very likely that the tenants are going to be in that weird place where the discounted rent is lower than moving to a power center. And don't forget how many power center stores are moving into malls too, such as Hobby Lobby, Five Below, Whole Foods, etc. Retail is just becoming a more interesting place.
pseudo3d
Posts: 3852
Joined: November 12th, 2015, 7:01 pm
Has thanked: 5 times
Been thanked: 77 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by pseudo3d »

Mall retailers like Payless ShoeSource, RadioShack, GNC, and GameStop had lots of off-mall locations over the years, and I've seen some of the independents/smaller chains from my hometown mall leave before. Haven't really seen stuff like Bath & Body Works or Gap have stand-alone stores unless they were in an outdoor mall/pedestrian area.
buckguy
Store Manager
Store Manager
Posts: 1004
Joined: January 31st, 2017, 10:54 am
Has thanked: 3 times
Been thanked: 61 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by buckguy »

When big boxes move to malls they often take spots with no entrance into the mall. There are some exceptions like Westfield Wheaton where DSW, Costco and Joann have mall entrances or South Park in Cleveland where Dick's has a mall entrance, but most seem to opt-out. GAP has gone into "lifestyle" centers and the occasional power center for a long time---they also have added streetside urban locations over time. RadioShack seemed more interested in coverage than in just being malls.

If anything, I've noticed a more rapid downward trajectory among most malls, even before COVID. The malls that died in the 90s or 00s usually were in small markets that were too close to metros with regional mega malls or suburban areas that had experienced economic decline. A few were in areas that just never took off like Lakehurst outside of Chicago. Since then most malls have been struggling---some have been eclipsed by nearby lifestyle complexes (Great Northern and Beachwood Place near Cleveland, although Beachwood has kept its upscale anchors despite having to compete with 2 lifestyle complexes) while others have simply lost underperforming anchors and inline stores and finally found someone to redevelop the property (Landmark near DC, Boulevard Mall near Buffalo).

Where land is cheap and mall development continued into the 21st century, the landscape is littered with dead or dying malls despite population growth (Atlanta is a good example). The cost of land in some places probably has kept down the number of dead and dying malls and prevented a lot of new big box or lifestyle development---DC is a good example, but malls are still dying like Lakeforest (image as a magnet for crime), White Flint (eclipsed by other malls for upscale retail and its redevelopment now in limbo because of litigation from a former anchor and changing plans for nearby areas), Ballston (too close to the big box redevelopment of the Clarendon neighborhood and has a white elephant 1950s Macy's with too much square footage for its market area) and retail redevelopment has had mixed results (Springfield and Prince Georges). Oddly, Wheaton which has been limping along for a couple decades and has long been considered a downscale mall seems to be stabilizing, although the JCP Looks like a candidate for closing and the big box wing with Costco and DSW doesn't seem to send customers elsewhere---so there can be exceptions, but the bigger trend is downward and it's happening where there is no real competition.

Even a true A-list mega-mall like Tysons Corner isn't immune from decline---This year, I noticed multiple vacancies there for the first time and the encroachment of no name stores---part of the problem may be that there has been no new generation of mid-market or even upscale "mall stores" in a long time and the retailers that have been opening new stores like LL Bean or Carhartt have no attachment to mall locations, even if they have gone into malls in the past. Also, some classic mall chains like GAP and its siblings have been struggling for quite awhile. They've had a better run than most clothing chains, but all of them seem to reach a point where are out of step with the broader market or their niche. Tysons was still busy but it looked like people were browsing more than shopping (not a lot of shopping bags) and the food service places were doing the best business, even though it was well after the normal lunch time.

There's still too much retail space and customers are taking advantage of having more options. Relatively healthy retailers are figuring out the balance between online and in person, but it will take a long time before things settle down and we'll probably see more malls decline and close regardless of the incentives they throw at chains.
pseudo3d
Posts: 3852
Joined: November 12th, 2015, 7:01 pm
Has thanked: 5 times
Been thanked: 77 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by pseudo3d »

buckguy wrote: December 27th, 2022, 7:44 am There's still too much retail space and customers are taking advantage of having more options. Relatively healthy retailers are figuring out the balance between online and in person, but it will take a long time before things settle down and we'll probably see more malls decline and close regardless of the incentives they throw at chains.
I'll never accept "too much retail space" as an excuse for the decline of malls, retail, and department stores (the truth is far more complicated). There's a definite lack of a new "generation" of mall/smaller stores, which is one problem, but why is that? (Again, it's complicated.) There's a few shining spots like Buff City Soap but those mostly prefer strip malls and not enough of that type to properly populate malls and power centers, nor is there enough resources to have small local stores grow into large or first-class generations.

In most of these cases, it's a simple matter of the newer development sniping stores from older malls, and because of the general age of power centers and malls, we never see many stores of enclosed malls stealing from older power centers.
Super S
Posts: 2691
Joined: April 1st, 2009, 9:27 pm
Has thanked: 11 times
Been thanked: 61 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by Super S »

pseudo3d wrote: December 27th, 2022, 10:56 am
buckguy wrote: December 27th, 2022, 7:44 am There's still too much retail space and customers are taking advantage of having more options. Relatively healthy retailers are figuring out the balance between online and in person, but it will take a long time before things settle down and we'll probably see more malls decline and close regardless of the incentives they throw at chains.
I'll never accept "too much retail space" as an excuse for the decline of malls, retail, and department stores (the truth is far more complicated). There's a definite lack of a new "generation" of mall/smaller stores, which is one problem, but why is that? (Again, it's complicated.) There's a few shining spots like Buff City Soap but those mostly prefer strip malls and not enough of that type to properly populate malls and power centers, nor is there enough resources to have small local stores grow into large or first-class generations.

In most of these cases, it's a simple matter of the newer development sniping stores from older malls, and because of the general age of power centers and malls, we never see many stores of enclosed malls stealing from older power centers.
Mall rents also have something to do with this. Some of the larger operators such as GGP were out of touch with smaller markets. I know a few people who have told me that, at one point, GGP was charging the same rent at Kelso's Three Rivers Mall, and Aberdeen's South Shore Mall, as they were at Clackamas Town Center. South Shore Mall was in bad shape for years, a bad local economy in that area was also a factor. While the mall did end up under local ownership, and was making an effort to get local stores in there with lower rents, it developed structural issues and is now closed.

Three Rivers Mall is in a similar situation where it is now under local ownership, but does not have the structural issues. There has been an effort to get more local stores to open up with mixed results. Stores are sometimes setting their own hours and at times many of the mall stores are closed during mall hours. However, the reputation as a struggling mall remains and some people don't bother going in the mall any more...in the case of Three Rivers Mall, many of the stores left for the open-air Triangle Center when it was redeveloped. But Triangle has seen closures too in recent years....Radio Shack, Lane Bryant, Bed Bath & Beyond, Ace Hardware, and Office Depot to name a few.
ClownLoach
Valued Contributor
Valued Contributor
Posts: 2698
Joined: April 4th, 2016, 10:55 pm
Has thanked: 40 times
Been thanked: 289 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by ClownLoach »

At this point in the mall transition I have less belief that even "B" quality malls will survive unless they have the ability to be reconfigured to consolidate some existing space, turn some space "inside out" and create outdoor Paseo type setups, etc.

But the true "A" quality malls may have a few short term vacancies but in general they are not going anywhere but up. The best malls in the best locations just wind up increasing the radius of the market they serve, and ironically the best of these malls are still early in transitioning to more restaurants, entertainment, mixed use etc.

The idea that every single city with a 100K population should have a multi anchor enclosed mall is dead and never coming back. But the true regionals will keep adapting and moving on even if it means a metro area that had half a dozen malls reduce to just the single "A" mall.
storewanderer
Posts: 14379
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 298 times
Contact:
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by storewanderer »

B malls will have trouble. They are uneven and then come off as undesirable places to shop. The mall in Reno is what I'd call a B mall. Some tenants invest in their stores constantly and have nice stores that are with the latest design/remodel, other tenants don't. The food court is at least 40% vacant and what is there is lousy. The Round 1 tenant that went into Sears is a joke and the other 2/3 of Sears is still vacant. The restrooms in the mall are absolutely horrendous and the parking lot is not well lit. I feel like B malls are those locations that do some pretty strong sales volume for their tenants but their tenants sort of milk them by not consistently investing in their stores, the mall management companies milk the tenants by underinvesting in the mall itself but demanding high rents since they have medium-high volume stores, and if the tenants could figure out a way to relocate off mall, they would seriously consider it if they felt they could do the same volume off mall. For instance GAP has zero presence in the Reno mall with any of its formats; it once had GAP, GAP Kids, and Banana Republic. They've moved to outlets or off mall. Sephora was once in the Reno mall but moved out years ago into the "lifestyle center" far south of town with Dillards, then got back into the mall via JCP, and now that is closed so they are out of the mall again. Apple never touched the Reno mall and went straight for the "lifestyle center" when it was built. So this is what makes these B malls such a hassle. They are in uneven condition, stores are not there that you'd expect to be there when they are the only mall in a large market. This is why these B malls will face some serious challenges. I do think redeveloping parts of them into dense apartments and public transit basis is their only way out, and they adding in some useful stores like a Target that sell everyday items to the mall would help a great deal.

At the A malls, such as the one in Roseville, every tenant has its store upgraded in tip top design and condition. The mall is clean and well maintained, restrooms are large and well maintained, parking lot is well lit and feels safe. A malls are true showplaces for brands and retailers to be at their best. You don't want to leave an A mall because it is the opportunity for every brand, every retailer, to be at their best.
pseudo3d
Posts: 3852
Joined: November 12th, 2015, 7:01 pm
Has thanked: 5 times
Been thanked: 77 times
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by pseudo3d »

ClownLoach wrote: December 29th, 2022, 1:25 pm At this point in the mall transition I have less belief that even "B" quality malls will survive unless they have the ability to be reconfigured to consolidate some existing space, turn some space "inside out" and create outdoor Paseo type setups, etc.

But the true "A" quality malls may have a few short term vacancies but in general they are not going anywhere but up. The best malls in the best locations just wind up increasing the radius of the market they serve, and ironically the best of these malls are still early in transitioning to more restaurants, entertainment, mixed use etc.

The idea that every single city with a 100K population should have a multi anchor enclosed mall is dead and never coming back. But the true regionals will keep adapting and moving on even if it means a metro area that had half a dozen malls reduce to just the single "A" mall.
Any "inside out" remodels for "B" malls won't work if the demographics have soured, and at some point it's not recoverable.

Having a multi-anchor enclosed mall for a 100k population (or less than that) isn't dead IF they learn to compromise and change and evolve. I know that one of the reasons my local mall started to die was because the rent was too high for what it was, leading to a lot of turnover in the smaller, local stores. So if regional malls had more local stores (properly cultivated to not just be cheap banners and just the trash that local stores tend to be associated with), more non-fashion stores, maybe a grocery store anchor, and more community events, they can come back to life. Imagine all those trashy kiosks being replaced with "festival marketplace" stalls or farmers' market stalls.
storewanderer
Posts: 14379
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 298 times
Contact:
Status: Offline

Re: Tenants leaving mall for Power Centers

Post by storewanderer »

pseudo3d wrote: December 31st, 2022, 11:23 am

Any "inside out" remodels for "B" malls won't work if the demographics have soured, and at some point it's not recoverable.

Having a multi-anchor enclosed mall for a 100k population (or less than that) isn't dead IF they learn to compromise and change and evolve. I know that one of the reasons my local mall started to die was because the rent was too high for what it was, leading to a lot of turnover in the smaller, local stores. So if regional malls had more local stores (properly cultivated to not just be cheap banners and just the trash that local stores tend to be associated with), more non-fashion stores, maybe a grocery store anchor, and more community events, they can come back to life. Imagine all those trashy kiosks being replaced with "festival marketplace" stalls or farmers' market stalls.
Many of these malls need to go back to the future with their store mix and try to get a more broad mix of stores in to appeal to more customers more often.

However I think many US consumers are simply done with malls. Malls have done things like design themselves in a maze like design to force people to walk past as many stores as possible with weird long inconvenient entry halls, bad parking lots, etc. US consumers once had no choice and could be hassled around a mall like rodents in a maze, but with online shopping, consumers are now so used to immediate easy shopping that they do not want to park, walk 5 minutes into a mall, then try and figure out where a store is, walk another 5 minutes to get to the store (being harassed by kiosk sales people along the way), then finally spend the 3 minutes finding what they need, then try to figure out how to get back to their car again (another 5 minutes if they remember the route) when they can just buy online or go to a power center, park 1 minute from the door, spend 3 minutes finding what they are looking for, and get out of there.

I know in my mall visits during the past month my general observation was nobody seemed happy being there and the atmosphere was just off. We have one single enclosed B mall around Reno area (population 500k). This should be A+ mall but it just isn't. It is a solid B, yes. Also I note Five Below who is opening stores everywhere, has skipped joining the local mall. I have seen Five Below in malls out of town frequently, so their skipping the mall and instead opening across the road with Whole Foods also says something.
Post Reply