U.S. malls reinvent themselves
Chicago-area operators try new angles to draw tenants
CHICAGO — The American shopping mall isn’t dead. But a slice of the industry is on life support, suffering from changing times. Now, mall owners and developers are working on a remedy.
Here’s the problem: Many consumers are choosing to spend their money on experiences — not stuff — and when they do shop, they increasingly do so online. Five months into the year, the U.S. saw more than 2.5 times the number of announced store closings as all of last year. As the nation’s third-largest metropolitan area, Chicago certainly has seen a number of stores going dark.
At some top-performing malls, the exit of a weak retailer opens the door for a stronger performer.
But it’s a different story for other malls that struggle to fill vacancies and attract shoppers.
As a result, mall operators are trying to reinvent their centers, whether that means reinvesting to draw trendier tenants or sought-after offprice chains or swapping some retail space for housing, hotels, offices, fitness centers or even trampoline parks.
But those changes take time, and it’s not clear whether they’ll be enough to keep drawing shoppers at a time when most industry watchers predict the country will see only more stores and malls shutter.
Retail sales at department stores have declined 36.7 percent since they peaked in January 2001, and the pace of decline is picking up, according
to research from Morningstar.
The overwhelming majority of retail sales still happen in stores, but the internet’s share is rising. In February, the National Retail Federation projected online sales this year would increase three or four times faster than overall retail sales. Major store-closing announcements are outpacing openings by more than 30 percent this year, and analysts at Credit Suisse recently predicted as many as 1 in 4 malls would close in the next five years.
“Once a mall starts to go into decline, it’s very hard to turn it around without some radical changes to the facility,” said John Melaniphy III, president of Chicago-based retail and real estate consultancy Melaniphy & Associates.
The company that owns Charlestowne Mall in the Chicago suburb of St. Charles, now being redeveloped as The Quad St. Charles, found how fast the world is changing since purchasing the mall in 2013. It initially planned to keep the existing indoor mall structure and add new buildings along the mall’s edges, the city said.
Four years later, after failing to make that work, owner The Krausz Companies is pitching a new plan that would keep existing anchor stores but demolish vacant Kohl’s and Sears stores and significantly shrink the size of the mall. The concept plan, proposed in April, also calls for building 155 town homes and 256 apartments north and east of the existing mall.
“We are eagerly awaiting redevelopment of this visible project,” Rita Tungare, St. Charles’ director of community and economic development, said in an email.
Melaniphy said he thinks there also will be more redevelopments that shrink the amount of space devoted to retail and mix it with residential or hotel development.
That’s already happened at the former Randhurst Shopping Center in the Chicago suburb of Mount Prospect. It billed itself as the largest
mall in the world when built in 1962 but struggled to keep up as more upscale shopping centers opened nearby. It relaunched as Randhurst Village in 2011, an open-air shopping center with shops, restaurants, a movie theater and hotel.
In Bloomingdale, another Chicago-area community, the company behind Stratford Square Mall is trying to invent a whole new mall species. David Jackson, president and chief executive of StreetMac Asset Managers, which operates Stratford Square, dubbed it the “neighborhood multimall” — a mix of retail, entertainment and the kinds of community-focused businesses you don’t typically see in malls.
A few years ago, Jackson thought there would still be enough business to support a group of second-tier traditional indoor malls. As retail upheaval has continued, it’s a bet he no longer wants to take.
“If you take the old playbook, the most you can hope to do is tread water with what you’ve got,” he said.
Today at Stratford, there
are storefronts offering dance, soccer, jiujitsu and guitar lessons, fitness classes and spas. Round 1 Bowling & Amusement stays open after regular shopping hours, with bowling, karaoke and a floor jammed with chiming, flashing arcade games.
Vacant space near one entrance will become a brewpub, expected to open by Thanksgiving, and a Harley-Davidson store. That store will sell apparel and merchandise, with a motorcycle test track outside, according to Jackson.
Jackson said he plans to turn the former J.C. Penney store, which closed in 2014, into an indoor sports and athletic training facility. Macy’s closed its store at the mall earlier this year.
Traditional retail stores will account for only about 40 percent of the nonanchor space, and he wants to focus on higher-quality stores, even if it means pitching in for remodeling expenses or taking lower rents.
“The only stores you want know you want them, and they’re going to push for tough deals,” he said.