Do malls still matter: Shopping centers keep up with the times
CHAMPAIGN — In a quick online search from home, a shopper can find all things Santa Claus this holiday season.
Click and buy a Santa costume with wig, an 8-foot inflatable Santa, Mr. and Mrs. Claus salt and pepper shakers and a multitude of movies, like the instantly downloadable Amazon video, "Santa Claus Conquers the Martians," in high definition.
But where can children, even pets, actually sit on Santa's lap and tell him what they want for Christmas? The local shopping mall.
As corny as it may sound, said Dennis Robertson, general manager of Market Place Shopping Center in Champaign, this is where you can come see Santa Claus.
And that, he said, is a good example of that real-life experience that malls offer, along with shopping.
Of course malls still matter, said Faith Hope Consolo, a licensed associate real estate broker with Douglas Elliman Real Estate in New York.
"Good, updated malls in good locations matter," she said, adding that it's no secret there has been a huge consolidation of retail and enclosed malls in the last decade or so.
Some 20 years ago, there were many local and regional department store chains as well, Sears, JCPenney, Montgomery Ward, for example.
But there has been a huge consolidation since then, she said, and today, a mall owner has a limited selection of department store names to anchor their centers.
Especially since the recession in 2009, enclosed shopping malls across the country have struggled with store vacancies. Some malls have closed altogether. And the number of "zombie malls," which are functionally dead malls with vacancy rates higher than 40 percent, has increased from 1 percent in 2006 to 3.6 percent today, according to Ryan McCullough with CoStar, a commercial real estate information company. General Growth Properties, one of the largest owners of shopping malls in the country, including Market Place, declared bankruptcy in 2009. But McCullough said it has divested itself of some of its problem properties and has an occupancy rate above 95 percent.
McCullough said you hear a lot about dead malls, and it is an accelerating phenomenon, but the average mall is not that.
"The average mall has recovered pretty well since 2009 and is relatively healthy today," said McCullough, adding that more investor groups are interested in purchasing mall properties. "In general, the malls are performing a bit better than many people are realizing."
McCullough said CoStar has noticed three reasons some malls are struggling. Loss of a major anchor that can't be replaced can cause a snowball effect in a mall, he said. Also, malls in overbuilt retail areas struggle, especially if the area has declining population and household incomes. And, he said, the area they've seen the most malls struggling since the recession are those with lower than average population densities in a 3-mile ring around the mall, which tend to be those in more rural and suburban areas. Those malls historically have thrived, because they were the only shopping option, but now there's more competition from the Internet, for instance.
The online factor
Online shopping is growing, taking a larger piece of total retail sales each year.
E-commerce sales as a percentage of total retail sales have increased from about 3.5 percent in January 2008 to 6 percent at the end of the third quarter of this year, according to the U.S. Census Bureau. And in a recent monthly survey by the National Retail Foundation, about 75 percent of people said they planned to do at least some of their holiday shopping online this year.
Those facts have ramped up predictions of the American shopping mall's demise in the next decade.
Jesse Tron, spokesman with the International Council of Shopping Centers, said if you take away food, beverage and auto sales, online shopping's share of retail sales is even larger, and online sales are growing faster than retail sales as a whole.
But it's still a small percentage of total sales and doesn't mean the death of the shopping mall, he said.
"Catalog sales were supposed to do that, too," he said.
At 18 years old, Krystal Grady and Brooke Withrow, both of Tolono, are definitely in a tech savvy generation. But on Wednesday night, they were strolling around Market Place mall, where they like to eat at the food court and see the Christmas lights. They both said they prefer shopping in stores to shopping online.
"You get to see what things really look like," said Withrow, adding that you can't try things on online or get things right away.
Tron said online shopping won't end the shopping mall industry, but it will change the way it operates. In the future, he said, the most successful retailers will take an "omni-channel approach," meaning they will have an e-commerce presence, mobile-commerce presence as well as brick-and-mortar presence. Retailers may move toward smaller footprints for their physical space, he said. But online sales won't weaken the appeal of the shopping mall.
"There are plenty of malls that are still the absolute cornerstone of the community," he said.
People have forecasted the death of the enclosed shopping mall since its inception, Tron explained.
Lincoln Square Village in downtown Urbana was one of the first enclosed shopping malls in the country, according to local Attorney Dick Theis, whose father-in-law, Charles Weber, was involved in getting Carson Pirie Scott to invest in developing Lincoln Square, which opened in 1964. It was designed by Victor Gruen, who designed the first indoor mall in Rochester, N.Y.
Over the next three decades, indoor shopping malls continued to be built across the country, but by 2000 had significantly slowed. In 2001, a PricewaterhouseCoopers study focused attention on the lack of indoor shopping mall construction and a growing number of "grayfield" malls defined by very low sales per square foot and store vacancies. The predictions of the death of the shopping mall ramped up after that and more so since the recession, according to Tron, as more shopping malls began to fail, especially ones where the demographics changed around them or the recession had a deeper impact.
But as a category, Tron said, the enclosed shopping mall has weathered the storm better than some. Consolo, of Douglas Elliman Real Estate, said it's the secondary and tertiary malls that must be innovative to avoid struggling.
The Village Mall in Danville, a smaller market indoor shopping center, has had to weather several vacancies created by the exit of national chain stores, like Target, Hobby Lobby, JCPenney, Waldenbooks and Steve and Berry's, and smaller stores, too.
Lincoln Square in Urbana has had its share of struggles since its heralded opening almost 50 years ago. With the development of Market Place in Champaign in the 1970s and the more recent big box corridor development on North Prospect Avenue, the national retailers moved out of Lincoln Square. In 2001, Bergner's announced it was closing its location at Lincoln Square and keeping its Market Place location open. Theis said the national retailers want to be near the interstate highways, like Market Place is.
More than shopping
There's still a need for something like Lincoln Square, said Theis, whose law office is still in Lincoln Square.
"There's a need for small shops," he said.
In 2004, a new effort was underway to change Lincoln Square from strictly retail to a mix of retail, residential and office uses.
It's an approach that has already been successful elsewhere in the United States, including California's Silicon Valley where an 18-acre residential area with a mix of retail and dining has replaced the Old Mill Mall. Although the residential plan has not developed at Lincoln Square, the mall is now on the National Register of Historic Places and has a mix of specialty retail, dining, entertainment and office space.
"Malls change," Theis said. "You do things to keep people interested, and when you stop doing things, then the mall starts to fade away."
Though still predominantly retail, the Village Mall has also turned to alternative uses to fill its available space with a gymnastics center and satellite location for Danville Area Community College.
Since its purchase by Dallas-based Tabani Group in 2011, the Village Mall has added three new anchor stores, Dunham's Sports, Ross Dress for Less and Burlington Coat Factory, and a Buffalo Wild Wings and dental practice in out lots.
Cindy Compton, manager of the mall, said it's close to 90 percent occupied again, and the increase in foot traffic is noticeable.
Compton said the goal is to build the mall into a place where people want to shop and eat and be entertained at the play center, movie theater or various special events.
Consolo said the malls around the country that are surviving and doing well are well-located, well-leased and well-maintained.
"They face challenges, including how to replace anchors when leases are up or they close, and how to remain exciting to the next generation who are very fluent in Internet shopping," she said. "They do that by adding restaurants and services — food is fashion now — and creating experiences you just can't have online."
Robertson said malls across the country are looking at ways to offer more experiences in addition to shopping, like unique entertainment and dining. He said the addition of Buca di Beppo was a greatly needed addition to Market Place.
According to the International Council of Shopping Centers, a survey by Glimcher Realty Trust shows that dining out, attending a movie or participating in community events are among the reasons people prefer shopping at malls to ordering goods online. Although shopping will always be the primary reason they go, they want a mix of retail, restaurants and entertainment.
Tron said shopping malls have always incorporated both dining and entertainment, but that has ramped up more.
"It's about creating an environment, a living center, that you may not get elsewhere," he said. That means a food court, but sit-down restaurants, too, he said, or a cafe, or coffee shop and other service providers and entertainment.
"Increasing those types of tenants into the mix are very, very important right now," he said.
Compare, contrast: A look at three East Central Illinois malls
Market Place Shopping Center
2000 N. Neil St., Champaign
Year opened: 1976
Type: Single-level, enclosed, regional
Anchor tenants: Bergner's, Macy's, J.C. Penney
Total gross leasable area: 1,044,984 square feet
Expanded: 1984, 1990, 1999
Renovated: 1987, 1994, 1999
Annual customers: 10 million
Owner: General Growth Properties of Chicago is the second largest retail property Real Estate Investment Trust in the United States focused exclusively on owning, managing, leasing and redeveloping regional malls throughout the country with 123 regional malls, totaling approximately 128 million square feet.
The Village Mall
2917 N. Vermilion St., Danville
Year opened: 1972
Type: Single-level, enclosed, regional
Total gross leasable area: 469,000 square feet
Expanded: 1985, 1987 and 1991
Anchor tenants: Dunham's Sports, Burlington Coat Factory, Ross Dress for Less, Carson's, Sears, County Market and AMC Theatres
Owner: Tabani Group of Dallas purchased mall in 2011. The real estate investment firm, which acquires underused properties to bring them to their full potential, according to its website, owns more than 5 million square feet of properties in multiple markets throughout the United States.
Lincoln Square Village
201 Lincoln Square, Urbana
Year opened: 1964
Type: Multilevel, enclosed, local
Total gross leasable area: 274,000 square feet
Tenants: Mix of professional, entertainment, dining and specialty retail shops
Owner: Principal owner, Jim Webster, a C-U businessman