Suzette Parmley/The Philadelphia Inquirer – NEW YORK – As he paced back and forth in the PREIT booth at the Jacob K. Javits Convention Center, Joe Coradino had a mission: to sell Macy’s spaces in malls that his company owns and that are on the brink of closing – and soon.
Among those targeted in the Philadelphia area are the Macy’s at Plymouth Meeting Mall and the one at Moorestown Mall.
And on Day 1 of a major retail real estate gathering last week – the New York International Council of Shopping Centers Deal Making Conference – Coradino’s schedule was packed with meetings with representatives of what he dubbed “anchor-replacement prospects.”
“Half of my time has been spent with [them],” Coradino said late last Monday. “The point to be made is that demand is pretty robust. As I walked from one meeting to the next in the booth, one tenant stopped me and said, ‘We really want that space.’ “
Time is short.
In two weeks, right after Christmas, Macy’s Corp. will officially announce 100 stores to close in early 2017. These latest shutterings come on top of 38 Macy’s that closed this year.
On Friday, Elina Kazan, national spokeswoman for Macy’s Corp., said the after-Christmas announcement remains on track.
PREIT – Pennsylvania Real Estate Investment Trust – which owns several malls in the region, has become practiced at repurposing spaces left by struggling department stores including Sears.
Coradino said he anticipates more Sears closures in the new year.
“It takes a little time,” Coradino said of securing replacement tenants. “That’s the business. Our industry is one, a very small industry, and if you’re in it, every retailer knows every mall in America.
“In some cases, we have to make choices,” he said. “That is really the point, we have more stores than we need. Repurposing the anchor box can lead to increased traffic and sales.
“With Sears – and now Macy’s and its 100 stores closing – our goal is to help them get back on the right track,” Coradino said. “With Sears, there is more work to be done. We started with 27 [Sears] and now are down to 11 in the PREIT portfolio.”
Those who track the industry say PREIT is unique in its proactive approach.
“PREIT has been on the forefront of repurposing not only distressed anchor boxes, but also in repositioning older struggling centers,” said Phoenix-based Jeff Green, who counsels retailers on long-term strategy.
In 2006, for example, PREIT took back four closed Strawbridge’s as a result of the May and Federated consolidation. In their spots, PREIT put in a Target at Springfield Mall in Delaware County; a Century 21 in the old Gallery mall in downtown Philly; a Nordstrom Rack, Cheesecake Factory, and JCPenney at Willow Grove Park Mall; and added a Nordstrom, Crate & Barrel, five new restaurants, and 25 first-to-market tenants at Cherry Hill Mall.
William J. Park, a partner at Deloitte & Touche LLP’s Philadelphia office, said the downsizing of the department store and the emergence of e-commerce has put retail in “a period of significant disruption.”
“New technologies have allowed smaller, more nimble retailers to take shares away from the traditional big-box retailers, and the barriers to entry have been lowered,” said Park, who covers regional retail for Deloitte.
“At the same time, consumer spending patterns have changed significantly,” Park said. “According to the Bureau of Labor Statistics, consumer spending on goods has decreased significantly as a percentage of total household spending, while spending on services has increased over the last 10 years.”
PREIT sees opportunity in the disruption, Coradino said.
The closures provide “an opportunity to enhance the overall shopper experience and drive traffic and create value with our real estate as we have done consistently over the years,” he said. “Today, we have 15 percent of our space committed to dining and entertainment. That number would be close to zero percent a decade ago.”
Coradino said the strategy has generated results.
“For the last 10 department stores we have reconfigured, we have seen 40 percent more in sales generated from the boxes [store spaces],” he said. “We think it’s a good decision for Macy’s to prune their store count and invest in their existing stores. It’s no secret that the value and contribution of many department stores have been declining in recent years.”
But not all shoppers are buying that, like Jennifer Britton, 51, of Florence, Burlington County, and her daughter, Tiffany, 23, who visited the Macy’s at Moorestown Mall last week to Christmas-shop.
The store, although decked out in full holiday splendor, was more than half empty on a Thursday night with most of its merchandise significantly discounted.
“It’s a shame,” Britton said as she carried a Macy’s bag with the bright-red star. “This is the closest Macy’s to our home. The Macy’s at Burlington Mall also closed. We will lose the convenience of having a Macy’s so close.
“It’s very sad what’s happening.”