THINKING OUTSIDE THE BIG-BOX
New breed of retailers helps ailing malls experience a revival, fill vacancies
Seventy-foot spaceships and intergalactic tunnels now occupy a 40,000-squarefoot space in Village at the West Oaks that once housed shelves brimming with bedding and home goods.
Gone is traditional big-box retailer Bed Bath and Beyond, and in its place has risen Seismique, a retailer designed to at once appeal to a younger audience more interested in experiences than accumulating things while at the same time breathing new life into an ailing mall.
Even before the pandemic trounced retail, big chains were casting big boxes aside as they shifted to e-commerce, shrinking their physical footprint and leaving giant holes in shopping centers across Houston and the country.
The retrenchment was accelerated by the pandemic, with retail occupancy falling 60 basis points in Houston to less than 94 percent over the
course of the last year, according to NAI Partners, the first time it dipped below that level since 2014.
The decline hurt both retailers and investors. New real estate development also declined 25 percent, according to NAI. But turnover also offers an opportunity to reimagine
traditional retail spaces.
And that is part of the appeal of experiential retailers such as Seismique. The expectation is that they will occupy large-store formats fewer traditional retailers will take while drawing crowds that spill into surrounding shops and boost a shopping center’s profile.
“What we’re finding is the big boxes are shrinking their footprint because they don’t need the floorspace. The problem for a landlord would be trying to split those boxes,” said Kirt Rimpela, of Wu Property Management, which operates 1.6 million square feet of retail across 14 shopping centers in greater Houston, including the one that now houses Seismique. “You have to find those alternative tenants, which is where Seismique comes in.”
An experiential retailer can lift a whole development, said Matt Ragan, director of property programming and leasing for Rebees, a Dallas firm that works with the Dallas-based developer Lionstone. For the redevelopment of downtown Sugar Land they’re working on, Lionstone and Rebees are bringing special effects company Flight School into the old Z Gallerie after the big-box furniture retailer shuttered the store in 2019.
The augmented reality space aims to transport customers to a fantasti
cal world where a lightkeeper hands them a lantern that can be used to collect light.
“The demand for this kind of content is just enormous,” Ragan said. “We see this as a seeder … It’s just a great magnet it just pulls people in.”
As people do more of their day-to-day shopping online, retail centers built around big boxes have to be remade around experiences, he said, so consumers have a reason to leave home and engage with things they can see, feel, taste and touch.
“There’s 2 trillion square feet of retail in the U.S. and a lot of that was empty pre-COVID and a lot of it is going to be coming up empty,” Ragan said. “We think we’ve got a lot of opportunities over the next couple years to take some retail and turn it into something special and unique.”
Jason Baker, whose Baker Katz owns 30 shopping centers, agreed.
“That’s one of the big pivots moving forward, is how you’re driving traffic
to retail,” he said. “And I think experiential is at least part of the path forward.”
Shopping centers designed in the 1980s were built around big boxes where people came to check items off their shopping lists. David Glover, the new chief creative officer at developer MetroNational and former executive director at Universal Studios now charged with reimagining Memorial City Mall’s more experience-based future, describes them as “houses of brands” all mashed together with little thought paid to any thread to tie
them all together.
Conversely, he said, when you step into a place like Disneyland, you show up knowing “great things are going to happen to you.” He calls Disney a branded house, built upon programming, unified design and shared experiences that inspire people to get up out of their chair and visit in person.
“That’s what we’re doing, is transforming Memorial City into a branded house,” Glover said.
The shift comes as companies such as Bed Bath and Beyond find that giant retail spaces have become a burden. At the same time, Seismique creator Steve Kopelman saw the space as a blank slate. And his creation scratches the itch of a generation more interested in experiences than it is things.
“The younger generation, they don’t strive to get a Rolex. They strive to see the sun rise at Machu Picchu,” he said. “I think we’ve given them that sunrise.”
Seismique has been selling out on weekends at its 30 percent capacity limit, Kopelman said, noting he’ll likely start allowing 50 percent of his roughly 1,200-person capacity inside this summer. He said he is confident he’ll recoup his more than $7 million capital investment within the company’s first two years.
“Even with COVID, we’ll do that,” he said last week.
Kopelman said he expects about 30 percent of his annual business will come from tourists, once travel resumes.
Wu Property Management, Seismique’s landlord, is fielding interest from other virtual reality and entertainment companies looking for space, Rimpela said.
“There’s going to be more of that happening. It’s just that those concepts are just now coming to fruition,” he said.
But consumers can be fickle, so this new type of retailer will have to work to hold their interest, said Venky Shankar, research director of Texas A&M University's Center for Retailing Studies.
“Retail is always cyclical. People get fascinated with some concepts and then after a few years they want different ones,” he said. “It’s very hard to make any of them stick for any amount of time.”
Still, Kopelman expects his concept has staying power. It’s a big open box with a big free parking lot, and the way the space is designed guests can go one of four ways. There’s no one path to follow.
“They’re free to stay here as long as they want,” Kopelman said. “There is no wrong way.”