How reliant are malls on department store anchors?
With another round of closings for Macy’s, Sears, Penney’s and Kohl’s, many malls will again be scrambling to fill dark anchors.
Many malls are being converted to mixed-use developments that often include retail as well as hotels, residential and office space. In some cases, developers add experiential features such as outdoor areas, movie theaters or amusement parks. A few are revamping without an anchor department store.
For example, Maryland’s Owings Mills Mall, which opened in 1986, lost a J.C. Penney last month and a Macy’s last year. The property is undergoing a multimillion-dollar revamp that will include a movie theater and restaurants and a greater emphasis on outdoor shopping — but no department store.
“They’re trying to make it more interesting and more experiential,” Jan Rogers Kniffen, a retail consultant, told NPR.
The Fashion Mall in Plantation, FL opened up in 1988 with a Bloomingdale’s, Lord & Taylor and Macy’s as anchors, but the latter closed in 2007. The mall is also converting to a mix of retail, residential and office space with no anchor.
“People are looking for a place to spend time but they don’t want to walk through a mall,” Greg Matus, a commercial real estate expert, told Local 10 ABC News in Florida.
On its first-quarter conference call, officials at Simon Property Group, the nation’s largest mall owner, discounted the media talk of malls or department stores dying.
But a report from real estate research firm Green Street Advisors earlier this year suggested that hundreds of department stores would need to close to help malls reach levels of productivity reached more than a decade ago, promising more empty anchors.
Cedrik Lachance, director of U.S. REIT Research at real estate research firm Green Street told Reuters, “The high-end mall still has a lot to offer to retailers and customers, but many lower-end properties will face sizable challenges in the coming decade and could garner a disproportionate share of headlines.”
- As Their Anchors Sink, Malls Try To Present Retail ‘Experience’ – NPR
- Fashion Mall to be replaced by new retail, residential complex – Local 10 ABC News
- U.S. shopping mall REITs hurt by department store woes – Reuters
- Who says the mall is dead? – San Diego Tribune
- Simon CEO: ‘Flatlining’ economy hurting malls more than failing retailers – Indianapolis Star
- Department store anchors at malls face a new demographic of shopper – Philadelphia Inquirer/TwinCities.com
- Wausau mall workers worry about Sears closure – Wassauh Daily Herald
DISCUSSION QUESTIONS: Are department store anchors essential to malls? Do you see mixed-use developments playing a primary role in reviving malls?
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12 Comments on "How reliant are malls on department store anchors?"
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Retail Strategy - UST Global
Malls will survive just fine with fewer department stores, provided they maintain an “assortment mix” of stores/restaurants and entertainment that is a draw for the shopper. I’d be curious if there are statistics available that indicate that a good percentage of mall shoppers go to the mall and never enter the department store, just as there are a good percentage that visit the department store and never set foot in the mall. When I think of some of the newer “street malls” that do really well, they have a nice mix of stores and restaurants as the draw and rarely a department store (perhaps a Crate and Barrel-sized specialty … ).
Maybe the property owners can use some of that empty space to provide the mall with overall “click-and-collect” areas as well as other draws.
Principal, Your Retail Authority, LLC
I love the concept of a mall. A destination where I can get a lot of my to-do’s done and have a little lunch too. Are they dependent on department stores? No. As much as I have always loved the department store (I cut my teeth at Federated so my heart and soul are there), times are changing.
I see mixed-use — lots of pop-ups, entertainment, food (fast and slow), comfortable places to sit and plug in my computer and get a little work done. You get the picture.
And that’s my 2 cents.
Independent Board Member, Investor and Startup Advisor
Owner, Tony O's Supermarket and Catering
The mall at one time was the place to go for almost all your shopping needs and to socialize and dine with friends. That is no longer the case, as retail today is fragmented with online sales increasing and anchor stores leaving unprofitable malls across America. Our local mall is 75 percent empty. It has a Pretzel Time and a little sandwich place left in an empty food court. Rural malls have been hit hard by the bad economy, and even large cities are over-saturated with them.
There are new concepts of filling these spaces with micro-breweries and fun-themed restaurants and entertainment, but it takes the right place and investors with deep pockets who want to risk capital in their community. The only anchors left in our mall are Super Kmart and J.C. Penney, and Kmart shuts down next month, so it is gong to be tough to fill up these places. Yes, over time some will thrive with new concepts and others will become huge wastelands and be bulldozed for other development.
Senior Vice President, Dechert-Hampe (retired)
In reading previous comments, I find Peter and Tony Orlando’s comments offering up the two ends of a spectrum. Some malls are very successfully reinventing themselves as entertainment destinations with some shopping attached. Others are withering away to nothing. The question of the day — at least for me — is what distinguishes one from the other. Is it geo-demographics? The creativity and investment of the mall developer? Or something else? My instincts say population density is the driver. But I’d love to know if anyone has data.
Owner, Tony O's Supermarket and Catering
CEO, The Customer Service Rainmaker, Rainmaker Solutions
CEO and Disruptive Retail Specialist, Gustie Creative LLC
I see mixed-use developments reviving engagement in offline retail through specialty shopping and creative dining opportunities. Both provide an enjoyable destination experience. Add a hotel and entertainment and it becomes a getaway weekend for some shoppers. In the past, the department store anchor would have been the main draw but these days it is a specialty anchor (e.g. sporting goods such as Dicks or REI) that may be included.
In regard to the anchor store dilemma, how ironic would it be for Amazon to fill this role? Maybe not as farfetched as we may think as the company continues to expand its brick and mortar presence.
Global Retail & CPG Sales Strategist, IBM
As consumer tastes have changed, so have the driving forces of malls. Mixed use is definitely a draw, as are the most popular specialty stores that we can all name by brand. Malls are destinations and mall operators need to be far more flexible than they have typically been in the past to be able to evolve, as shopper tastes evolve faster than ever. Perhaps more pop-up-centric malls may be one way to have that flexibility.
CFO, Weisner Steel
No, but … if you look at a “typical” (1M gsf) mall, usually about 2/3 of that lies within the department stores, and while they aren’t — and never were — as productive as the in-line stores (in terms of sales), and in many cases they own their own properties or (otherwise) don’t pay rent, they still give the mall much of its identity. They’re called “anchors” for a reason.
And of course, one of the main reasons an anchor leaves a mall is because the mall itself is performing poorly … aging buildings in “transitioning” inner-ring suburbs probably have little future as retail properties.
Director of Retail, Milwaukee Art Museum
Retail and Customer Experience Expert
Personally, I think malls need to rely on experience providers like movie theaters, restaurants and event space to be the draw rather than department stores. Department stores help “anchor” the space in terms of merchandise and staff, but many consumers today are going to the mall for entertainment in addition to shopping. Future architecture of malls I think will be very different than those designed 10 years ago.