Summer 2009 The New Mall
It’s a picture that speaks volumes. In the bare shell of Frederick’s of Hollywood in Crestwood Court Mall in St. Louis, are stacked artists’ paintings. The once empty store space is being modified into an art studio. What’s happening here in Crestwood is being duplicated in malls all over the country: malls are trying novel approaches when it comes to filling retail vacancies.
It’s no secret that these are trying times for retail. Mall vacancies have been on the rise and other related statistics—foot traffic, sales slumps and more—paint a somber picture. What’s encouraging, however, is that despite these trying times, many shopping centers are staying strong as a result of creative strategies employed by corporate and local specialty leasing managers. Hard-hit shopping centers are taking the offensive approach and hitting back. Developers are finding creative uses that build traffic and broaden merchandising uses for vacant space. In this article, we take a look at a few ideas that have sprung up across the American mall space over the last few months.
Strategies in place
A successful leasing arrangement needs more than a good idea—and specialty leasing managers have always recognized this. The rise in vacancy rates at malls has witnessed an attendant drop in rental rates. For some entrepreneurs, this is the time to hop in and start a business. Jim Allen, senior vice president of local leasing at Simon Property Group, says that the company has had high occupancy rates in carts. “It’s fair to say that we are trying to make lease deals that are more attractive to the retailer. I tell my team to make the best deal—have a full program no matter what—just fill it up,” Allen says.
At Westfield, Ted Kaminski, senior vice president of specialty leasing, said the company put long-term, sustainable strategies in place before the recession hit. For example, he explained, the company has taken an aggressive position about participating in trade shows. “We [rented] a booth at SPREE and our teams are attending all the possible shows like Magic, gift shows and bringing new ideas and products back to existing operators,” Kaminski says.
Betting that design will improve productivity, over the past year, the Westfield team focused on redesigning kiosks and retail merchandising units. It’s a concept the company calls “floating retail.” After creating merchandising regions in each property, kiosks and RMUs are placed to complement permanent inline stores. The concept evolved after studying the needs of common area retail, and evaluating what works in department store layouts, which have counter operations that don’t block visibility. Floor-level lighting and the absence of a roof, have the retail unit looking like it floats in the common area, Kaminski says. Sight lines are also improved. Tenants can still create their own identity, but must adhere to pre-specified design criteria. Included in this list of criteria—no canned lights or roofs on RMUs and kiosks. Westfield plans to continue to invest capital in 12 additional centers this year.
In another strategy that has worked for the company, centers identified “enterprise zones” within each retail district of a property. Within a given center, there could be up to three enterprise zones where the specialty leasing manager has complete flexibility as the deal maker. In each district, a designated location offers retailers introductory rental rates if the merchant brings new product offerings into the property. After a 90-day test period, and a successful run at a new business, the specialty leasing manager may consider graduating the tenant to another location if the business is viable. According to Kaminski, in the past six months, Westfield has seen an uptick in the volume of entrepreneur inquiries as a result of this initiative and from a newly designed corporate website.
For Carrie Dworek, vice president of leasing and Pat Fleser, director of specialty leasing at Glimcher, motivating the field is important during times like these. Dworek says the company has streamlined the paperwork that is part of a specialty leasing manager’s job and focused on having leasing occupy center stage.
Melinda Holland, senior vice president, business development, at General Growth Properties says the company has remained focused and positive despite its financial struggles. All GGP programs support a retailer’s business and help with cash flow and reduction of expenses. According to Holland, GGP has a network-wide credit card payment program (available in the majority of properties) for merchants who want to pay rent by charging it on a personal credit card.
Ideas that work
When Leisa Son wanted to keep Crestwood Court Mall in St. Louis, MO, full and occupied, she looked in all the usual places and some unusual ones. What emerged is a creative partnership between the mall and the St. Louis art community. Son, the Jones Lang LaSalle specialty leasing/marketing manager, turned to community grassroots efforts and got creative when it came to solving the problem of vacancies.
The owner is in the design and development phase of a major renovation that would change the enclosed center to an open-air lifestyle property.
Nevertheless, a partnership between Centrum Properties and the RegionalArtsCommission was crafted. With plenty of unleased space available, Son organized an open house for community artists and “ArtSpace” was born. She has repurposed 200,000 square feet of vacant space with over 50 studios, galleries, theaters and offices. The enormous spaces offer room for theaters and galleries in addition to office areas. Son points out that times have been tough in the arts community and that this project has helped the artists as much as it has helped the mall. The artists pay “next to nothing,” she says.
ArtSpace is believed to be the largest community project of its kind in the United States. “We know of no other mall that has accommodated artists to this magnitude. We have been able to redefine retail space usage with this project. Despite the economy, we’ve created a sense of rejuvenation and excitement and suddenly, this mall is a destination once again,” Son says. She adds that new retailers and restaurateurs are inquiring about leasing space as a direct result of the ArtSpace program. There was even a casting call at the center for a Hollywood movie that created increased traffic. Son reports that a spirit of camaraderie has developed between the various visual and performance artists at the mall.
Son took center stage at a recent Jones Lang LaSalle conference on retail leadership, where she shared her story with the management team. Jennifer Adams, senior vice president of specialty leasing at Jones Lang LaSalle, points out that the company’s biggest focus is on filling inline vacancies. She has been
very impressed by the ArtSpace idea. “Obviously, it isn’t going to work everywhere, but it can work in a vacant anchor or vacant store,” Adams says.
Mixing it up
At Simon Property Group, Jim Allen has directed his team to focus on local leasing. The company has placed a priority on canvassing the local market, tracking results and helping new retailers launch their business.
Here are some ideas that are taking off in malls around the country:
- Coddington Mall, a Simon center in Santa Rosa, CA, is capitalizing on the popularity of the movie, Slumdog Millionaire. It has opened “Bollywood Beauty,” a temporary inline store selling henna tattoos, spa services and Indian jewelry.
- At Boca Town Center, in Boca Raton, FL, a little sweetness goes a long way. “Passion for Pastry,” a bakery, has been operating in an inline space since November 2008. Owner, Alethea Hickman, sells custom-decorated cupcakes and takes special orders for a variety of cakes. With the local bakery nearby, enough inventory is on hand for the mall store.
- At Dayton Mall, in Dayton, OH, the local manager leased a vacant inline space to the Humane Society of Greater Dayton creating Meowza, a gift shop and center for rescuing and adopting cats. The store opened for business last year when the organization received a $40,000 grant to renovate and prepare the mall space. It took over from a cell phone and accessories operation.
- In an effort to drive foot traffic and generate income, some GGP properties such as Northridge Fashion Center in Northridge, CA, are creating local farmers’ markets that operate multiple times per week. Other shopping centers including Hanover Mall in Hanover, MA, are working closely with the local Chamber of Commerce to produce an authentic farmers’ market at the center.
Businesses that focus on service as the end product have also been taking up mall space and doing well. Karen Larsen, assistant vice president, specialty leasing at Urban Retail Properties says she has seen an increase in leasing uses such as music schools, military recruitment
centers, and dance/yoga and martial arts companies.
- Kirkwood Mall in Bismarck, ND opened an Internet-based radio station in a vacant store, Larsen says.
- Recently, Hayner Public Library expanded and named Alton Square Mall in Alton, IL its main branch location. This library, a permanent tenant since 1991, tripled its size in an 18,000 sq. ft. Sears wing.
- Steve Sless, vice president, Prime Retail, says he has seen an increase in service uses in temporary stores. Music Depot, a music store that primarily sold instruments, has expanded into an adjacent store at Prime Outlets in Florida City. Now the store teaches music lessons and has created a summer music day camp for kids.
- Maryland opened a temporary Route 70 welcome center at Prime Outlets, in Hagerstown while the new tourist centers are under construction. The center drives traffic and fills a leasing space.
- Westland Center in Detroit leased an 18,000 sq. ft. space to the local dance academy. It’s a “win-win,” Jennifer Adams says of the use of space. “The traffic it generates from parents dropping their children off for classes is fantastic.”
Dedicated to success
What keeps specialty leasing directors up at night? It’s the merchant. Steve Sless of Prime Retail says a high priority is “to make sure that we do everything we can possibly do to make specialty leasing tenants successful. And, because of that, when their lease expires they hopefully decide to renew with us,”
At the end of the day, a little optimism goes a long way. While the market remains skeptical about whether consumer confidence will improve along with retail sales growth, many believe growth in employment and improved credit will be the real indicators for growth in the shopping center industry. Until then, creativity and fresh ideas continue to bring much-needed vital energy to the nation’s malls.
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