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03/07/2018

Reimagining the American Mall

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It’s the worst-kept secret in retail real estate. Consultants preach it and researchers chart it.  Customer experience is No. 1; shopping is No. 2. Eateries and entertainment brands are desired, department stores are repurposed.


A recent study from A.T. Kearney relabeled shopping centers and malls of the 21st century as customer engagement spaces. A survey of 81 leading malls by JLL found that adding new food and beverage options was top of the list of the biggest changes being made. And more than half of those properties were linking dining innovations to new entertainment concepts.


Chain Store Age spoke to three operators of those big regionals to find out how they are rethinking them and remaking them. Jeff Zeigler, a mixed-use expert who recently joined Starwood Retail Partners as COO, is on a nationwide tour, assessing what must remain and what must be added at the 30 properties now under his guardianship. CBL Properties president and CEO Stephen Lebovitz is reconstituting department store spaces and forging ever-closer ties with local communities. Joseph Coradino, CEO of PREIT, has been zealously remaking the company’s network of market-dominant regional malls for the past five years, effecting wholesale change in the process.


At the close of 2012, PREIT malls housed a total of 83 Macy’s, J.C. Penney, and Sears stores. Now, 45 of those spaces have been reclaimed by PREIT and reconfigured with on-trend formats such as off-price, entertainment, fitness, fast-fashion, and sporting goods. Dick’s Sporting Goods and Field & Stream moved into vacated department store space at the Viewmont and Capital City Malls. Tilt took up residence in the Patrick Henry and Valley Mall properties. H&M has shown keen interest in PREIT’s vacancies, opening at three of the company’s malls — Magnolia, Wyoming Valley, and Dartmouth.


Coradino appears pleased with the part PREIT is playing in the reimagining of the American mall.


“We think our results are really proving out our thesis that it’s not about quantity, it’s about quality,” Coradino said. “Think about it — we have replaced 10 of 11 department stores and are at lease on the last one. The underperforming legacy tenants that have vacated are creating opportunities to redefine the mall environment in a more diverse and exciting way.”


PREIT tracks its progress with cold, hard numbers, not by how many chef-driven restaurants or Legolands are now doing business in Macy’s former ready-to-wear department. The number that Coradino is focused on is 500. That’s the average sales dollars per square foot figure he is aiming for portfolio-wide.


“We reported very strong same-store net operating income results in Q3 and really think our being ahead of the curve on both dispositions and anchor replacements has a benefit to us as we move into 2018,” Coradino said. “As for sales per square foot, we have made it to $475 — well on our way to our goal.”


Owner and operator of 63 enclosed malls nationwide, CBL is on a similar path as PREIT, remaking the experience at malls that have long been shopping magnets in places such as Chattanooga, Tenn., Huntsville, Ala., and Brownsville, Texas. Company chief Lebovitz grew up in the mall business founded in 1978 by his father Charles (CBL carries his initials), and he’s on record as saying that department store closings present an opportunity to developers and a new breed of retailers.


“We have done redevelopments at over 41 properties, either recently completed or underway,” Lebovitz said. “A lot of them have been taking back Sears and Macy’s and Penneys and bringing in Dick’s, Ulta, T.J. Maxx, Gold’s Gym, and The Cheesecake Factory. As part of future redevelopments we’re looking to add more destination tenants like Dave & Busters, Round 1, or Marcus Theaters.”


A former Sears store at CoolSprings Galleria in Nashville could serve as a prototype for the mega trend in mall metamorphosis. CBL purchased the department store and converted it into food-and-fun center populated by Kings Dining & Entertainment, Kona Grill, Connors Steak & Seafood, H&M, and American Girl. Coming soon at CoolSprings is a new California Pizza Kitchen format that features a bar extending into the common area.


Engaging with the local community — another prescription of retail consultants — is something CBL has long done and is now amping up. This past Christmas, CBL launched a ground-breaking  program called Santa Cares, which was in partnership with autism organizations. Malls opened their Santa centers to families with autistic children prior to regular opening hours to give the kids a chance to visit Santa in a low-sensory environment.


“Most of our malls are the only mall or the dominant mall in their market and play a significant role in the community,” Lebovitz said. “Shopping is just one piece of the experience.”


One of the big changes in the mall business last year is a change that took place at the headquarters of Starwood Retail Partners, where industry veteran Scott Wolstein handed the reins to new CEO Michael Glimcher. In short order, Glimcher hired Jeff Zeigler, who cut his teeth at Westfield, worked on Easton in Columbus, Ohio, for Steiner, and most recently developed mixed-use projects at Oliver McMillan. Zeigler made his debut with Starwood at the ICSC New York Deal Making show in December, then packed his bags and set off on a tour aimed at visiting every one of Starwood’s properties.


“What we have are 30 local developments that we are tailoring to the local communities we’re dependent on,” Zeigler said. “So what we’re doing that’s really different from what was done in the past is skewing our mix to that audience and envisioning more of a regional than a national mix of tenants.”


A perfect example of that thinking was installing the Plano Children’s Theatre at The Shops at Willow Bend in Plano, Texas. When Hudson’s Bay decided to exit the Texas market a few years ago, Willow Bend lost anchors Saks Fifth Avenue and Lord & Taylor. Starwood tore down the Saks building and put Crate & Barrel and Restoration Hardware in its place. Unique dining options are to follow in the fall when a dining district opens with Whistle Britches, Mexican Bar Company, and Knife, a steakhouse from celebrity chef John Tesar. Also in the plans is a 200,000-sq.-ft. office building.


“We don’t want to think about these as retail-only assets,” Zeigler said. “These properties need diversification of uses. More entertainment. More food and beverage. More green spaces.  Mixed-use and diversification is the order of the day.”


Zeigler is convinced that malls can take part in the live-work-play strategy driving most big, new retail projects. He is not alone. JLL’s mall study noted that 40% of top malls are adding residential space and 33% are building hotels.







Check out project profiles for Starwood, PREIT, and CBL.