Shopping malls use car parks to drive up trade
SHOPPING malls in the United States are fighting for shoppers with one thing their web rivals can’t offer: car parks.
With customer traffic sagging, US retail landlords are using their sprawling concrete lots to host events such as carnivals, concerts and food-truck festivals. They’re aiming to lure visitors with experiences that can’t be replicated online — and then get them inside the building to spend some money.
“Events draw people to the shopping centre,” said Keith Herkimer, whose company, KevaWorks, is working with big landlords such as GGP and Simon Property to produce outdoor events. “They generate revenue for the owner and offer a chance for cross-promotion, so they can try and drive more customers into the stores.”
Mall owners across the US are grappling with record store closings and declining rents. Retail property values are down 3pc in the past six months, as all other types of commercial real estate showed gains, according to the Moody’s/Real Capital Analytics indexes.
A Bloomberg gauge of publicly traded mall landlords has tumbled 15pc in the past year, the worst performance among US real estate investment trusts.
Amazon and other internet retailers continue to grow, while department stores including Sears and Macy’s have been closing hundreds of sites. Payless, the discount shoe seller, is among the latest to announce a massive closure of 400 stores as part of a bankruptcy plan.
“We expect to see a trend of more closings,” said Carol Kemple, an analyst at Hilliard Lyons. “Most retailers, if they’re still standing in September, will probably try to make it through the holiday season.”
Retail landlords have already made a push toward experience-driven offerings by adding restaurants, cinemas and activity centres for children. Many malls are also adding rotating stores around for only a short time — known as pop-ups — that are meant to attract young customers who see shopping as an event.
Now, events are reaching beyond the malls themselves. Herkimer’s task is to lure crowds to car parks with outdoor events that generate as much as $60,000 (€56,000) a week for mall owners.
The idea is gaining traction. Next month, Simon Property is hosting the first carnival in its Round Rock Premium Outlets car park, about 20 miles north of Austin, Texas. Similar events are being held for the first time at locations such as Central Mall in Port Arthur, Texas, managed by JLL.
Lisa Harper, senior director of specialty leasing for Chattanooga-based CBL, said the Tennessee company has expanded its carnival business at many of its 87 properties over the past couple of years. She and Herkimer have discussed the possibility of adding movie nights to some properties. CBL’s Triangle Town Centre in Raleigh, North Carolina, is about to start its second mini-concert and food-truck series, Harper said.
Sandeep Mathrani, chief executive officer of GGP, said at a conference earlier this month that the perfect mall now would include one department store, a supermarket, an Apple shop, a Tesla store and businesses that started out online, like Warby Parker, which sells prescription glasses and sunglasses.
Clothing stores now represent about 50pc of the average shopping centre, down from about 70pc, he said.
“Landlords are trying to give people reasons to come to the mall, whether it’s a Tesla charging station or getting local car clubs to host events in their parking lots,” said Alexander Goldfarb, an analyst at Sandler O’Neill & Partner. “It’s not a fun time to be either a retailer or landlord, but it doesn’t mean every single mall or shopping centre is going to close. Far from it.”
And for some retailer landlords with better-performing properties, the industry’s turmoil could mean more opportunity.
“This very painful process will surely take more than five years,” Steven Roth, Vornado Realty Trust’s chief executive officer, said in a letter to shareholders this month. “It will also create enormous opportunity for those with the capital and management platforms to feed on the carnage.”