10 Things Shopping Malls Won't Tell You
1. "We're a dying breed."
Not long ago, Zan Jones, 43, took a trip to a mall in her hometown, Plano, Tex., and came home slightly depressed. The mainstays were still there Dillard's, Sears, and a diner she's known since her teenage years but in between the familiar landmarks, she found empty storefronts, "For Rent" signs and sloppy temporary shops. "I felt kind of nostalgic," says the marketing professional and mother of two. "It just used to be so great."
It's a common feeling. Shopping malls, once a hub of suburban commercial life, are rapidly losing ground to online shopping and off-mall locations. And it shows: vacancies at regional and super-regional malls topped 9% in the first quarter of 2011, up from 5.6% four years ago, according to market researcher Reis, Inc. "We've seen malls at the highest vacancy rates since we've been tracking them for the last 10 years," says Ryan Severino, a senior economist for the firm. And more may be on the way, because of clauses in many leases that allow retailers to opt out if a mall can't retain a major department store.
The empty store fronts make malls less appealing for consumers, and create a ripple effect, says Philip Martin, a real estate investment trust strategist for Morningstar. That's only enhanced the power of online retailers: Online sales grew 12.6% last year to $176.2 billion and are expected to increase at a compound annual rate of 10% through 2015, according to Forrester Research. In contrast sales at all brick-and-mortar stores in and out of malls rose 3.7% in 2010 and are expected to grow 4% this year, according to the National Retail Federation. But that modest growth won't save the mall, says Michael Niemira, vice president of research and chief economist for the International Council of Shopping Centers. Many large retailers are downsizing to smaller locations, now that they don't need such large display floors or inventory space, he says: "Now 'big box' is a smaller box."
2. "Thank goodness you're hungry."
More malls are investing in a tried-and-true tactic to get shoppers to stick around: feed them. The theory is simple, says Niemira. If people aren't rushing home for lunch or can get a snack for a screaming child and stay in the mall, they'll stick around longer. "And obviously the longer people stay the more likely they will spend money," he says. In the interest of keeping shoppers in the building, some malls are renovating their food courts to bring in more local eateries, while others are opening new wings dedicated to high-end restaurants. Department stores are also dedicating more square footage to food by adding and expanding restaurants. Not long ago, the Filene's Basement at the Stamford Town Center in Stamford, Conn. was torn down and replaced with seven restaurants, including a P.F. Chang's China Bistro, California Pizza Kitchen and The Capital Grille, says Bill Taubman, chief operating officer of Taubman Centers, which owns the mall. "We absolutely think that it's helped the shopping center both in terms of the number shoppers as well as the quality," says Taubman. Arun Sharma, a marketing professor for the University of Miami School of Business Administration says the strategy is being duplicated at other malls.
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Shopping malls, once a hub of suburban commercial life, are rapidly losing ground to online shopping and off-mall locations. And it shows: vacancies at regional and super-regional malls topped 9% in the first quarter of 2011, up from 5.6% four years
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