Return of the Mall
Elaine Misonzhnik / Retail Traffic
The enclosed regional mall—the uniquely American retail property that sprang to life in the 1950s and 1960s—has been declared dead (or dying) for years…
…But a funny thing happened over the past three years.
As the Great Recession unfolded, regional malls—rather than being pushed to the brink—weathered the storm better than any of their supposed replacements. The very things that made fortress malls seem so outdated—their size, their enclosed environments, their dependence on anchors—proved to be powerful assets instead…
…To be sure, challenges remain. There continue to be wide disparities between top-tier malls and lower grade assets. Many mall owners are exploring offloading the lowest quality assets in their portfolios. And there is little, if any, room for new enclosed regional mall development.
Instead, what’s likely to emerge over the next several years is a retail landscape with somewhat fewer regional malls than exist today. The malls that will remain, however, will not be dying beasts. Instead, these survivors will continue to be retail stars and the centers of their respective markets.
Forces of nature
So how to account for the mall’s comeback?
An important point that many retail industry insiders forgot during the boom years was that malls became a hugely popular retail concept for a reason. The developers that created the country’s first regional malls picked their sites based on strong demographics and wide trade area pulls, says Chris Macke, senior real estate strategist with CoStar. Because of their size, malls have been able to assemble a broader selection of retailers in one place than any other retail format, better positioning them to fend off competition from the Internet.
“It’s about having great real estate, a great location and critical mass—at least 500,000 square feet of space, and great retailers,” says Michael P. Glimcher, chairman of the board with Glimcher Realty Trust, a Columbus, Ohio-based regional mall REIT with a 21.6-million-square-foot portfolio.
An example of this approach is Taubman Centers-owned The Mall at Short Hills in Short Hills, N.J. The 1.34-million-square-foot property boasts five functioning department store anchors in Macy’s, Bloomingdale’s, Nordstrom, Neiman Marcus and Saks Fifth Avenue and features 42 retailers that can’t be found anywhere else in New Jersey. Even today, tenants wanting to get into that center often have to wait until a spot becomes available, notes Jeff Green, president of Jeff Green Partners, a Phoenix, Ariz.-based real estate consulting firm…
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