Painting a healthy picture of the American mall

NEW YORK • Retailers and shopping centre owners are gathering in Las Vegas this week and preparing to send a message - the demise of the American mall has been greatly exaggerated.

Or, in the language of the moment, it is fake news - mostly.

But it could be a hard story to sell. Store closures are accelerating, retail-industry stock prices are sinking and investors are speculating which struggling chains might be next to file for bankruptcy.

The popular perception is that consumers are buying more and more of what they need online.

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But industry executives attending the International Council of Shopping Centres' annual convention, the industry's biggest, insist that any doomsday talk is overly pessimistic and that the brick- and-mortar business is healthy enough to weather the storm.

"We're trying to arm our people with facts so that when the questions are asked, we can say no, actually, these are the facts," said Mr Greg Maloney, chief executive of retail at brokerage Jones Lang LaSalle.

Those facts include a trend of property owners re-leasing many stores, in advance of closures and bankruptcies, for more profitable uses such as food and entertainment, he noted.

Another sign that things are not all bad: For retail properties in large cities across the United States, the vacancy rate held at 4.9 per cent in the first quarter, near the lowest level of the past decade, data from JLL and CoStar Group show.

Still, the pressures are real and the industry's woes are on everyone's mind in Las Vegas, where 37,000 attendees - from merchants and property brokers to developers and landlords - swarmed the convention centre for sessions on topics such as how to draft a lease and the advent of food halls.

The four-day event ended yesterday.

There would be some tough conversations too as mall owners search for the right formula to combat declining foot traffic and make their properties Internet-proof.

Every major US department store - from J.C. Penney to Nordstrom - reported disappointing first-quarter sales.

J.C. Penney is shutting down stores at about 140 locations, while Macy's, the industry leader, is closing 100 stores and cutting about 4,000 jobs on top of 6,200 layoffs announced in January.

Department stores - not just in the US, but also around the world - are not the only ones struggling to adapt in the age of online shopping convenience spearheaded by the likes of Amazon Prime and mega Chinese shopping portal Taobao.

Rue21, a teen-apparel chain, last week became the latest retailer in the US to file for Chapter 11 bankruptcy, following a string of similar defaults this year.

Landlords are facing the prospect of a rising tide of vacancies as even healthy merchants find that they do not need as many stores.

Mr Maloney is not in denial about the problems. "We know that it's not the greatest environment right now," he said. "We don't want people to think we have our heads in the sand."

There are pockets of optimism amid the gloom.

Mr Stephen Lebovitz, chief executive officer of CBL & Associates, a Chattanooga, Tennessee-based mall operator with 128 properties, said he is focused on finding better uses for empty space left by failing retailers.

GGP is also among landlords looking for ways to Amazon-proof their malls by replacing closing stores with businesses that offer experiences shoppers cannot get online.

GGP CEO Sandeep Mathrani is working to open the first KidZania activity centres in the US and his company is teaming up with fast-fashion chain Forever 21 to roll out Riley Rose, a line of boutiques aimed at millennials.

Investors, however, are wary that it may not be as easy to fill all the empty space as property owners contend.

Shares of real estate investment trusts that own and manage malls are down 13 per cent this year, compared with an index of all Reits that is up 1.5 per cent.

Mr Lebovitz knows he has his work cut out for him, meeting with a wide range of retailers in Las Vegas, from Tesla and Apple to Hot Topic, a music-themed apparel merchant, and Dick's Sporting Goods.

"We'll get their take on what's going on and what they are going to do to address that," he said.

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A version of this article appeared in the print edition of The Straits Times on May 25, 2017, with the headline 'Painting a healthy picture of the American mall'. Print Edition | Subscribe