While doom and gloom might be the narrative for some shopping centers across the country, Omaha’s Westroads Mall is seeing its highest occupancy rate and sales per square foot in its 50-year history, its management says.
They say that’s because the mall has stayed one step ahead of what consumers want: A year and a half ago, it revamped and relocated its 1990s-era food court, ditching it in favor of locally operated Flagship Commons. Westroads used the former food court space to recruit the Container Store, a retailer that had been on Omahans’ wish list for years. And this summer, it will add another local eatery — Jones Bros. Cupcakes — and a new lounge area, with games and various seating options.
“The basic rule of thumb is that consumers vote daily with their pocketbooks,” said Jim Sadler, Westroads senior general manager. “If you don’t stay current and viable, you will be voted out of office.”
The evolution of the shopping mall has been top of mind for retailers and shopping-center owners, who gathered for an international conference in Las Vegas this week. They’re prepared to send a message: The demise of the American mall has been greatly exaggerated.
It’s a hard story to sell — especially outside of Omaha. Store closures are accelerating, some retailers’ stocks are sinking and investors are speculating which struggling chains might be next to file for bankruptcy as consumers buy more and more products online.
But industry executives attending the International Council of Shopping Centers’ annual convention — the industry’s biggest — insist that perception is overly pessimistic and that the bricks-and-mortar business is healthy enough to weather the storm.
“We’re trying to arm our people with facts so that when the questions are asked, we can say ‘No, actually, these are the facts,’ ” said Greg Maloney, CEO of retail at brokerage Jones Lang LaSalle Inc.
Those changes include a trend of property owners who are keeping an eye on retail closures and bankruptcies and re-leasing those spaces for more profitable uses, like food and entertainment venues — just as Westroads has done.
Another sign that things aren’t all bad: For retail properties in large cities across the United States, the vacancy rate held at 4.9 percent in the first quarter, near the lowest level of the past decade, data from JLL and CoStar Group Inc. show.
Locally, Nebraska Crossing Outlets in Gretna has been fully leased since its opening three years ago, developer Rod Yates said. The outlet mall also is wrapping up an expansion that will house an Ulta store and an H&M, to open in August. Yates attributes the center’s success to its mix of tenants, many of whom are new to the market, and a technology platform that allows the mall to collect data on its customers and where they shop.
Yates also is part of the team that owns and is looking to redevelop the Crossroads Mall site. A plan would demolish the old-style, covered mall — leaving the Target store — and replace it with a so-called lifestyle center, with outdoor walkways and office and residential space. The plan is still under development.
A representative for General Growth Properties, owner of Omaha’s Oak View Mall, didn’t return a request for comment, but the picture there slightly brightened recently, too: Its occupancy rate rose from 81 percent in 2015 to about 85 percent in 2016, according to an annual report from General Growth Properties, the mall’s owner. (General Growth also owns the Westroads, which reported an occupancy rate of 98 percent for 2016.)
Still, the pressures are real, and the industry’s woes will be on everyone’s minds in Vegas, where 37,000 attendees — including merchants, property brokers, developers and landlords — are expected to swarm the convention center for sessions on topics like how to draft a lease and the advent of food halls, like the one at Westroads, which is seen as somewhat of a trend-setter in the industry.
There will be some tough conversations, too, as mall owners search for the right formula to combat declining foot traffic and make their properties Internet-proof.
Adding experience-driven tenants like Flagship Commons or other entertainment venues has been one strategy.
At Shadow Lake Towne Center in Papillion, considered a “lifestyle center,” the mix of tenants includes traditional retailers, but also a Hy-Vee grocery store and gas station, a Taco Bell and a hair salon.
“It’s not just a shopping center,” said Amy Houston, the center’s marketing director. “It’s a shopping (center) and get your errands done at the same time. That’s kept our traffic counts up — or consistent — where maybe others are seeing a decrease.”
The Victoria’s Secret at Shadow Lake is undergoing a remodel, and the center is optimistic about filling the space vacated by Gordmans, which declared bankruptcy in April, Houston said.
“Although things ebb and flow, we’re confident brick-and-mortar stores are always going to be around,” Houston said. “They’re just going to have to keep changing and evolving to stay up with the demands of our customers.”
That change appears to be underway. Every major U.S. department store — from J.C. Penney Co. to Nordstrom Inc. — reported disappointing first-quarter sales, according to Bloomberg calculations.
J.C. Penney is shutting down about 140 locations, while Macy’s Inc., the industry leader, is closing 100 stores and cutting about 4,000 jobs on top of 6,200 layoffs announced in January.
Department stores aren’t the only ones struggling to adapt in the age of Amazon Prime. Rue21 Inc., a teen-apparel chain controlled by private equity firm Apax Partners, last week became the latest retailer to file for Chapter 11 bankruptcy, following a string of similar defaults this year. Landlords are facing the prospect of a rising tide of vacancies as even healthy merchants find that they don’t need as many stores.
Maloney, the retail chief at national broker JLL, isn’t in denial about the problems.
“We know that it’s not the greatest environment right now,” he said. “We don’t want people to think we have our heads in the sand.”
There are pockets of optimism amid the gloom. Stephen Lebovitz, CEO of CBL & Associates Inc., a Chattanooga, Tennessee-based mall operator with 128 properties, said he’s focused on finding better uses for empty space left by failing retailers.
General Growth Properties, owner of Oak View and Westroads, is also among landlords looking for ways to Amazon-proof their malls by replacing closing stores with businesses that offer experiences shoppers can’t get online. CEO Sandeep Mathrani is working to open the first KidZania activity centers in the United States, and his company is teaming with fast-fashion chain Forever 21 to roll out Riley Rose, a line of boutiques aimed at millennials.
This report contains material from Bloomberg News.
