USA TODAY International Edition
Store closures put malls in peril
Loss of department stores as anchors weighs on centers
CALUMET CITY, ILL. To say that the River Oaks Center, a sprawling mall in this blue- collar suburb of Chicago, has seen better days is an understatement.
When it opened 50 years ago, it was one of the first big malls in the Chicago area. And as recently as a few years ago, it boasted four major department stores — Carson Pirie Scott, J. C. Penney, Macy’s and Sears.
But in 2013, Carson’s and Sears shut their doors at the mall near the Illinois- Indiana state line. And the two remaining anchors — Macy’s and J. C. Penney — are facing strong headwinds. Both retailers have announced plans to close dozens of stores around the country in 2017.
With Sears warning investors Tuesday of “substantial doubt” about its ability to stay in business, the once- vibrant River Oaks provides a dour portrait of the tough road ahead for malls across the country in an increasingly disjointed retail landscape. As department stores lose out to online retailers, more malls might have to cope with trying to survive without an anchor — creating not only a visual reminder of failure but also the loss of a draw to bring shoppers to smaller stores.
“We recognize that these are perilous times for malls and shopping centers,” said Pete Saunders, Calumet City’s economic development coordinator, noting that sales tax revenue has plateaued in the community in the aftermath of the Carson’s and Sears closures even as the regional economy has improved. “The most successful malls these days are in the highest- income areas, and we’re firmly a working- class community, and that has definitely had an impact on us for sure.”
With American malls battered by growing preference for e- commerce as well as competition from discount retailers like T. J. Maxx and Marshalls, there has long been uncertainty about their health. Now as a onetime American stalwart like Sears nears a financial precipice, the storm clouds are only darkening.
Shopping centers like the Macon Mall in Georgia, constructed in 1975 in the midst of the golden age of mall building, are bracing for the impending closure of their J. C. Penney stores — one of 138 the company plans to shutter.
Analysts, such as the commercial real estate firm CoStar, have projected that nearly 25% of American malls are in danger of losing their anchors. After a missed $ 144 million loan pay- ment by the second- biggest U. S. mall owner last year, anxiety about the health of U. S. shopping malls has only grown.
Even before Sears’ dire announcement that there is “substantial doubt” about its financial viability, the company, based in Hoffman Estates, Ill., had announced plans to shutter about 150 of its Sears and Kmart stores. Macy’s had announced plans to close about 15% of its stores in 2017.
The ubiquitous mall retailer Aeropostale filed for bankruptcy protection in May. And others like American Eagle, Chico’s and The Children’s Place are managing multiyear plans to shrink their brick- and- mortar footprint.
River Oaks, which was recently sold to the Great Neck, N. Y.- based Namdar Realty Group and Mason Asset Management Group by Washington Prime, hasn’t been able to find tenants to take over either of the cavernous spaces vacated by Sears and Carson’s in the years since they left.
Joel Gorjian, who oversees acquisitions for Namdar, said he’s hopeful the company will soon be able to find tenants to fill the voids left by the departure of the department stores. While the big retailers are fading, he said there are plenty of businesses that would attract the sort of foot traffic that the smaller retailers need to thrive.
“You have to look to alternative uses or entertainment centers,” Gorjian said. “You can do a trampoline park; some malls have done skating rings; you can put in a call center; cloud storage ( companies) needs space.”
At Gorjian’s company’s newly acquired River Oaks mall, the former outer entry of the Carson’s entrance remains boarded up, and all signs of Sears’ presence in the mall are long gone. The indoor entryway to the old Sears is now blocked by a temporary wall with seven small signs advertising other retailers. About half the stalls at the food court are vacant.
“There are just not a lot of choices, and it feels like it has gotten worse as the big stores have gone,” said Mindy Cross, 73, a mall- walker who has come to the River Oaks on a near- daily basis for years to meet fellow seniors for a stroll, lunch and increasingly less frequent shopping.
James Davis, 70, another mallwalker who has been coming to River Oaks for more than 20 years, said he used to regularly go to the Sears to browse and would find himself opening his wallet. His Chicago home is kitted out with Kenmore appliances that he found during his strolls at the River Oaks Center.
These days, he said, most of his spending at the mall is limited to buying an after- walk bottle of juice or lunch as he chats with his friends.
“There’s not much here that I’m interested in these days,” Davis said of the shopping options.
Damien Berlanger, who manages the Embroidery Spot kiosk, said the impact of Sears’ closure has been especially felt by the small retailers.
“The foot traffic is just not what it used to be,” said Berlanger, 30, who has worked for several retailers at River Oaks over the years. “Since Sears closed, you see a lot of the smaller retailers come and go.”
Bob Patel, who owns a small beauty care kiosk in the mall, said he’s seen business decline by perhaps as much as 15% in the past year. His lease expires in about a year, and he said he’ll try to negotiate for better rent. If he doesn’t get it, Patel said he’ll consider moving his business elsewhere.
“It’s a struggle, but we have a small business, and our expenses are manageable,” he said. “We can survive. I don’t know how the bigger businesses do it.”
“The foot traffic is just not what it used to be. Since Sears closed, you see a lot of the smaller retailers come and go.” Damien Berlanger, who manages the Embroidery Spot kiosk at River Oaks Center in Calumet City, Ill. More businesses are using LinkedIn as their primary or sole jobposting site.