New owners bet outlet can help save West Oaks
The new owners of the former Macy’s at West Oaks Mall have big plans to redevelop the property into an outlet destination, but experts say the store’s closure sounds the death knell for the struggling mall.
The new owners of West Oaks Mall plan to redevelop a shuttered Macy’s into an outlet store as part of an effort to “bring life back to this area.”
But experts say the struggling center on the west side still faces an uncertain future in an era of changing consumer habits and declining interest in traditional malls.
Family-owned Mehta Investments acquired West Oaks Mall out of bankruptcy in August, but it had to purchase the Macy’s building separately. The family took over that 243,337-squarefoot structure from Macy’s Holdings for an undisclosed price later in the year.
The vacant two-story sits on 18 acres at Westheimer and Texas 6 in Alief, west of Houston.
The new owners announced plans Tuesday to redevelop the Macy’s location into The Outlet at West Oaks. The outlet store, which will sell brand-name clothing and goods at discounted prices, is expected to open later this year.
Mehta Investments also announced it would open Formal Gallery, a prom and party dress store, in the mall.
Ultimately, the company envisions a town center-type development with retail and entertainment.
“Experiencing the downturn of West Oaks Mall was very discouraging and I wanted to bring life back to this area,” Sunil Mehta of Mehta Investments said in a statement. “My family and I decided to purchase the mall with the vision that we could be that vessel that brings the revitalization. We look forward to launching The Outlet at West Oaks and seeing this property transform into a popular retail destination again.”
Macy’s was one of the original tenants of West Oaks Mall in 1984. However, sales at the 1-million-square-foot mall started to slide when closer-in Memorial City Mall was redeveloped and CityCentre was built in the 2000s.
“It’s been a downward spiral,” said Brian Ashby, a retail broker with CBRE. “There are too many big-box retailers there for them all to survive. Macy’s saw value in their real estate rather than a retail operation.”
The rising popularity of online shopping in recent years has only hastened the decline of West Oaks and other malls nationally.
One in four malls are expected to close by 2022, in large part due to e-commerce, according to Credit Suisse.
Amazon is aggressively entering the fashion world with Echo Look, a smartphone app that assists online shoppers with clothing purchases. Other direct-to-consumer startups, like Warby Parker and Chubbies, are upending the traditional department store.
“E-commerce has been a huge driving force behind mall and store closures,” Josh Orr, a retail consultant with Houstonbased Streamline Retail, said. “Amazon has driven prices down so much and it’s driven convenience to a point where they have become the store for everything and everyone.”
CBRE has been retained in the disposition of shuttered Macy’s stores around the world. Ashby and CBRE broker Sydney Dixon represented Macy’s Holdings in the West Oaks Mall sale. The firm also sold the former Macy’s at Greenspoint Mall last year.
Since 2015, Macy’s has closed 124 stores nationally, including three in the Houston area. The closures came even as Macy’s saw improved sales during the past holiday season. Comparable sales increased 1 percent in November and December.
Mehta Investments believes local operators offering a tailored shopping experience can help revive ailing malls.
“Local hands-on operators that have a lower cost basis have the agility to sign flexible leases and lower rents and craft creative retail environments that cater to the needs of the community,” Mehta said in an email.
Mehta Investments will benefit from owning the former Macy’s at West Oak Mall because it controls the store’s reciprocal easement agreements, which restrict what happens at and around the mall. The new owners will have to negotiate with fewer anchor tenants, like Dillards, to redevelop the mall, Ashby said.
To compete with the rise of e-commerce, brickand-mortar retailers are shutting some locations to focus on building more distribution centers.
Shopping malls are increasingly shifting toward two types of shoppers: high-end and value-oriented consumers, Orr said. Luxury malls like Simon’s Galleria are investing millions of dollars in store remodels to cater to high-end buyers.
Struggling malls, on the other hand, often focus on value-shoppers. Consumer interest in discounted, off-price stores has risen significantly since the last recession and has remained steady during the recovery.
Still, West Oaks’ loss of anchors like Macy’s and Sears will likely hurt smaller tenants there, who rely on bigger retailers to drive foot traffic to their stores.
It’s hard to say whether an outlet model can replace a store like Macy’s in attracting shoppers, Orr said.
“An anchor like Macy’s leaving has a huge impact on a mall’s ability to survive moving forward,” he said. “I don’t see how a mall can survive without something unique, like Memorial City’s playground or a foot-traffic generator like an Apple store.”