As retailers cull stores, US malls welcome more non-traditional tenants

NEW YORK • You cannot blame teenagers in America - and around the world - for no longer congregating at the shopping mall, like generations past.

There are not all that many stores left.

In the last few days alone, several shopping-centre staples unveiled plans to trim their footprints across the United States.

Gap said it would slash the store count of its struggling namesake brand by 230 locations over the next two years, just hours after J.C. Penney confirmed it would close 18 department stores.

That news came after L Brands announced its plan to close 53 Victoria's Secret sites in North America this year. And it is not just apparel.

Tesla, whose galleries are often inside shopping centres, said it was moving all its car sales online.

These moves come on top of all the chains that have already announced that they are closing or reducing their footprints due to bankruptcy. They include Payless, which is abandoning 2,500 stores; Things Remembered, which is closing most of its 400 stores and selling the rest; while mall favourite Brookstone trims operations and Sears continues to shutter locations.

Taken as a whole, many of today's shopping centres are becoming little more than an assemblage of fast-fashion retailers, Apple stores and foodcourts.

Mr Michael Guerin, senior vice-president of leasing at mall-owner Macerich, said: "You hear so much that shopping centres are dying. There definitely needs to be attrition and there are too many in the US."

The mall "just needs to evolve", he added.

The vacancy rate in US malls was 9 per cent in the fourth quarter, up from 8.3 per cent a year earlier, Ms Barbara Byrne Denham, a senior economist at Reis Real Estate Solutions, wrote in a report.

Some malls have found ways to adapt. Macerich - which has already started offering 180 day leases to encourage pop-ups to fill empty stores - added 32,898 sq ft of co-working space to its shopping plaza in Scottsdale, Arizona, earlier this year.

Non-traditional tenants like bowling alleys, movie theatres and digitally native brands are also finding their way into malls.

Online-first companies like Warby Parker, Bonobos and Casper are embracing what they call "offline" in a big way.

Mr Guerin said: "They need brick-and-mortar - we're hearing that loud and clear. When they open a store, their online sales go up.

"A lot of the stores you're seeing now weren't there five years ago."

Planet Fitness is taking advantage of retail store closings. Its chief executive Chris Rondeau said his business is immune to e-commerce's effects on brick-and-mortar, making it a good mall tenant.

He said in an interview on Bloom-berg Television: "Our business can't be Amazoned. We do about 5,000 workouts per gym per week, about eight million workouts a week in the US, so look at how much traffic we drive to these centres every day."

He added: "And the majority of those visits are on Monday to Wednesday. Most retailers are busy on the weekends, so we're a great co-tenant for these retailers to drive that traffic."

Planet Fitness shows how landlords, especially those with higher-quality malls in heavily-trafficked, urban locations, are using store closures as an opportunity to use the spaces differently, said Ms Lindsay Dutch, an analyst with Bloomberg Intelligence.

"They're taking advantage when they get that space back to turn it into something more experiential," she said. "They're looking to make it into offices, sometimes medical offices."

She added: "Every once in a while, there is a chance to put apartments in there and go with something more residential."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 04, 2019, with the headline 'As retailers cull stores, US malls welcome more non-traditional tenants'. Print Edition | Subscribe