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Fall Of The Mall? How Mergers And Millennials Are Changing An American Icon

Shopping mall operators are seeking increasingly unconventional tenants and attractions as retail mergers and disinterested young consumers cause traditional retailers to reduce numbers. That means identifying tenants today that will appeal in the mall of tomorrow.


 

In Dearborn, Michigan, Lord & Taylor has been tailored for Ford.

The Fairlane Town Center in suburban Detroit is retrofitting the former department store space and several other vacancies to accommodate offices for Ford Motor Co. The automaker will move 2,100 workers to the mall as it converts 240,000 square feet of former retail space into a product-planning center.

Photo credit: Fairlane Town Center

Photo credit: Fairlane Town Center

If it sounds unconventional, that’s the point. “Most major malls are overbuilt, meaning they can’t support the square footage they have allocated to retail,” retail analyst Jeff Green told Michigan Live for a story about the project. “Which is why they’re starting to look at nonretail uses being brought on the mall site.”

True enough, Fairlane is one of many malls across the country signing on non-traditional, high-traffic tenants as mall vacancies rise. Retail mergers and consolidations have resulted in fewer traditional department store anchor options. And younger consumers, accustomed to round-the-clock digital stimulation, are more likely to find the standard mall, with its cavernous walkways and recurring terrain of familiar shop windows, boring.

Roughly 200 U.S. malls are at risk of shuttering in the coming several years, according to Green Street Advisors. The analytics firm also estimates retailers will need to close about 800 locations, or a fifth of total mall anchor spaces, in order to achieve sales productivity of the mid-2000s.

That’s a lot of wide-open retail space. The risk for mall operators is falling for seemingly sexy new tenants that may not have the staying power of experienced retailers that better understand their market bases. Experienced retailers such as Apple, which has installed glass staircases and Edwardian decor to complement the locales of its many locations. Or custom menswear chain Alton Lane, which serves cocktails and conversation to better understand its customers.

Which leads to the question: If today’s major mall can serve as a planning center for a major automobile manufacturer, what will the mall of tomorrow hold? One hint: To survive, it must serve the shopper’s desire to connect and preserve the shared, relationship-based shopping experiences people long for.

Art Markets And Aquariums

In order to predict what tomorrow’s mall will hold, it is helpful to explore what today’s mall is changing into. For some centers, such as the redeveloping Stony Point Fashion Park in Richmond, Virginia, change means fire pits and gourmet grocers. At the Great Lakes Crossing Outlets in Michigan, it meant adding an aquarium.

Here is what some others are doing:

– In some shopping centers, displays of household items are being replaced with actual households. The Monmouth Mall in New Jersey is being converted to include apartment units and hotels. At the Laguna Hills Mall in Orange County, California, renovation plans include 350 apartments, and at the historic Arcade Providence in Rhode Island, former eateries and shops have been transformed into nearly 50 mini-lofts.

– At University Mall in Tampa, Florida, major redevelopment plans include a 37,000-square-foot health club to replace a former J.C. Penney. Among a health club’s advantages, mall operators said, is it brings people in several days a week and at different times of day.

 – In New York, the Westfield World Trade Center, scheduled to open in 2016, will include a Ford Hub as well as a couple bakeries and a range of specialized merchants from Dior to Kingkow kids clothing. Overshadowing its lengthy tenant list, however, will be the features that enable shoppers to connect. Among the services: the ability to order online and pick up in the store, and in-mall screens featuring products mall-goers can purchase via digital devices. The center’s developers describe it as a place “Where playtime, ‘me’ time and a new outlook comfortably coincides.”

– In some cases, the methods used to attract tenants are as creative as the tenants themselves. At Prescott Gateway Mall in Prescott, Arizona, the Miller Valley Indoor Art Market is filling a space vacated by Kirklands. Among the incentives the mall operator is offering new tenants is free rent during certain periods.

The Mall Of Tomorrow

So how will all of these changes manifest in the mall of tomorrow? I visited this topic a year ago and had the same takeaway then as I do now: As long as humans are hard-wired to connect and congregate, the core purpose of retail will not change.

From the days of early civilization, people came to market not merely to buy bread and spices, but to socialize. What has changed since then is what consumers expect in return for their transactions. We are spending our money in different ways, and increasingly on experiences. It is up to the retailer what that experience will be.

In some places, the mall of tomorrow will hold amusement parks and white-collar employers. But it also will continue to include clothing stores and cosmetics shops. The difference will be the reasons consumers congregate: to work, to spend the night, perhaps to buy a shirt. Mall operators, and their retail tenants, simply need to serve those needs as more space opens up around them.

This is the core purpose of retail, to supply needed goods but also the makings of a better lifestyle. There is still room for traditional retailers, but the old mall model – a million square feet of competing merchants – is no longer tempting; it’s lost its luster. The mix of tomorrow, and today, requires a balance of practical and exhilarating, more lifestyle integration and diversity.

In Michigan, the country’s first automaker is spelling this out. In the rest of the country, the writing is on the malls’ crumbling walls.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here

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