Are indoor shopping malls dying? Not necessarily.
Yes, there are several sprawling indoor malls that are dotted with empty storefronts. Construction crews have demolished several others. Still others have been converted to distribution centers or outdoor lifestyle centers.
But other indoor malls are thriving. And they’re largely doing this by providing what their surrounding communities want.
This might mean bringing in high-tech bowling alleys, pickleball courts and indoor miniature golf centers. Or it might mean luring local and regional restaurant chains to boost their food court offerings. It might even mean bringing in Tesla and other luxury car dealerships that let shoppers test-drive vehicles that they have long dreamt of buying.
Jeremy Bates, senior vice president for commercial real estate advisory and transactions at Coldwell Banker Commercial, said that the key is for mall owners to understand what the shoppers surrounding their retail spaces want, and then adapt to provide these services, amenities and shops to them.
“Each mall has to adapt in its own special way, according to the community,” Bates said. “There is no one-size-fits-all approach here.”
Bates understands the challenges that malls face today. And he knows the steps that the most successful malls have taken, citing some of the more interesting results from the most recent The Trend Report released earlier this year by Coldwell Banker Commercial.
This report studied the latest trends impacting shopping malls and identified the strategies that many mall owners are taking to compete today.
Bates said that mall owners are becoming increasingly creative today, with many focusing on enhancing their food courts, a way to attract foodies to their spaces. Others are focusing on entertainment, with some malls even offering aquariums.
Still others are focusing on fitness, bringing in brand-name fitness centers or offering yoga classes to attract more foot traffic to their malls, Bates said.
Shoppers might notice, too, an influx of virtual-reality entertainment centers, spaces that allow consumers to pretend that they are flying through space, riding rollercoasters or hang-gliding over the country.
“Malls are being forced to compete with some of the mixed-use developments that are offering a mix of restaurants, entertainment and shops,” Bates said. “They need to offer more of the same if they are going to bring in more foot traffic.”
Adding residential?
Some mall owners are bringing residential to their mall properties, too. This often happens when a large section of a mall, perhaps an anchor tenant, becomes vacant. Mall owners might then demolish an older structure and build new multifamily units on the site.
This can help boost the foot traffic at the remaining portions of the mall. If the mall offers interesting food choices, bars or entertainment centers, the residents of the new apartment buildings might be tempted to walk to the mall, perhaps stopping in at the shopping center’s other retailers when they are done eating, drinking or bowling.
“If there is a large vacant area, there is no reason why a developer or owner shouldn’t consider adding residential,” Bates said. “All it does is increase foot traffic. And at the end of the day, that is the goal of any mall owner. The more traffic drivers, the better for the tenants and the more successful the mall will be. If you bring residential, you have an added customer base that is right on site.”
This doesn’t mean that residential is the right fit for all mall properties, Bates said. Some malls might already be located across the street from or nearby existing residential. The area, then, might not need more residential units.
In other areas, the residents near the mall might not want a new apartment building. By forcing multifamily into such a community, developers and owners might breed resentment from potential shoppers.
“The key is to consider every opportunity,” Bates said. “I always say that it makes sense to exhaust every other opportunity first before you move to residential. That includes new dining options or experiential real estate. If you exhaust those other options first, then it might be time to consider a bigger change such as adding residential.”
The lure of the outdoor lifestyle center
Many shoppers today prefer outdoor centers that include shops, movie theaters, restaurants, bowling alleys, bocce ball courts, trampoline parks and whatever other addition developers can conjure.
And these outdoor centers are thriving even in cold-weather climes. In Chicago, for instance, there is the popular Oakbrook Center, a high-end and consistently busy outdoor shopping center in the suburb of Oak Brook, Illinois.
Bates points to the success of Crocker Park in Westlake, Ohio, in the Cleveland market as another example of a thriving outdoor shopping center.
Crocker Park includes retail stores, restaurants, office buildings, hotel space and residential. And, yes, the center remains busy even when the winter temperatures arrive.
“This is the perfect example of the live/work/play concept,” Bates said. “And after COVID, people want to be outdoors more often. They really enjoy the benefits of spending more time outdoors. You get to look at the sky and see some sun.”
And in the winter? Many of these outdoor malls offer heated sidewalks. They work hard to keep their pedestrian areas free of snow and ice. They also make it easy for people to get from the parking lots to the shops and restaurants.
When to start over?
This doesn’t mean, though, that all malls are going to survive. Many are struggling so much that it makes more sense to demolish them and start over with a fresh concept.
Bates said that owners might consider demolition if they’ve lost most of their anchor tenants. A lack of anchors is a sure sign that a mall is barely hanging on.
If anchors leave, the other interior tenants of a mall typically have stipulations in their lease that they can pay lower rents. Retailers might also be able to terminate their leases early if a mall’s anchor tenants leave,.
“Retailers understand that their success in a mall is largely based on the anchor tenants,” Bates said. “Anchors generate foot traffic. When the anchors leave, that foot traffic dries up. Interior mall tenants lose sales because the foot traffic is no longer part of the mall.”
Bates said that owners should look at alternatives when their anchors flee and they can’t replace them. That might mean scrapping the mall and building something new. It might mean transforming a mall into a warehouse center. Bates said that he’s even seen malls repurposed into schools.
“If there isn’t a tenant to backfill those empty anchor spaces, that’s when the demolitions start to take place,” Bates said.
But while some malls might become so obsolete that demolition is the best answer, many others are repurposing or rejuvenating themselves, becoming something akin to town centers.
Bates said that just eight years ago, he never would have predicted some of the changes that successful malls have undergone.
“I would not have expected to see fitness centers becoming key mall tenants,” Bates said. “I would not have expected residential or indoor trampoline centers. When COVID hit, it changed the uses we are seeing in malls. Now it is about creating an experience within a mall setting, something that you would not have seen just a few years ago.”
