While empty anchor stores and porches full of Amazon boxes seem to be the norm across the country today, brick-and-mortar retail is still going strong. Although shopping centers are losing big anchor stores like Carson Pirie Scott and Sears, as well as junior anchors like Toys “R” Us and Sports Authority, proper planning for these empty spaces and well-executed construction can keep shopping centers alive well into the 21st century.
There’s no question that e-commerce is growing, with pure-play e-commerce retailers (those without a brick-and-mortar presence) expanding by 65 percent since 2013. But those retailers accounted for just 5 percent of all retail sales in 2016. Many such retailers have opened physical stores in shopping centers, showing the value of brick-and-mortar shopping to these businesses.
So why are customers choosing to shop in stores instead of just online? Many are drawn into shopping centers for the experiences they have there. Going to see a movie, dining out in a restaurant, working out at a gym or getting their hair done at a salon can often lead to secondary visits within the same property, providing opportunities for retailers to build on other tenants drawing in customers.
When anchor stores close, mall owners should take the opportunity to redevelop portions of their center to include tenants that could help bring more entertainment and experience to their potential customers. For example, at Oakbrook Center in Oak Brook, Illinois, Brookfield Property Partners is currently redeveloping 250,000 square feet of space formerly occupied by a three-story Sears store to include KidZania, an experiential learning center for kids.
KidZania, a children’s entertainment business featuring miniature cities for kids to play in, will occupy the third floor of the structure while in-line stores will take up the department store’s former space on the second floor. Sears will retain its first-floor space in the building. A Sears Auto Center that previously occupied an outlot building at the shopping center will be demolished to make way for a future fitness center tenant.
These changes complement the center’s recent addition of a food hall and expansion of its AMC Theater. The complete transformation of the former anchor space will create a variety of experiential tenant spaces to attract potential shoppers to the center.
In addition to replacing anchor tenants with experiential and entertainment tenants, malls are growing by adding to their dining and drinking options. The food and beverage sector accounted for more than 10 percent of all brick-and-mortar sales in 2016, showing 20 percent growth since 2013. The once-popular food court is being replaced by more sophisticated food halls and other restaurants and specialty shops such as wine bars or white tablecloth dining in many shopping centers.
Some malls are even redeveloping parcels of adjacent land to include residential components. Urban and suburban centers have found that creating town center-type developments has helped bring in new shoppers, increasing the overall value of the property. Residential elements can be added toward the outskirts of the parking lots or, in some cases, even on top of the mall’s retail stores.
When building owners choose to redevelop a portion of their center, they should bear in mind that keeping the rest of the facility operational during construction is crucial to maintaining positive customer experiences during that time. By selecting a general contractor that has experience and protocols for maintaining a safe, neat and tidy construction site, owners can keep customers coming to the mall, even during some of their largest construction projects.
The Oakbrook Center project began in the summer of 2017 and is slated for completion in the fall of 2019, so shoppers expect the rest of the mall to maintain its viability during the long period that construction will have an impact on the space. Graycor Construction has more than 95 years of history in performing live environment projects. Over that time, Graycor has worked with some of the largest developers and owners around the country, including Simon Property Group, Brookfield Property Partners, Westfield Corporation (now URW), Forest City, Rouse Properties (now owned by Brookfield) and Starwood Retail Partners. They have worked on high-profile projects at Oakbrook Center, Woodfield Mall and Old Orchard mall, among others.
Working with these owners and centers, Graycor teams employ the live environment approach to anticipate and avoid disruption through the planning, scheduling and execution stages of the project. The Graycor process includes protocols for material delivery and on-site storage, hot-work and shut down requirements, jobsite security and safety measures, temporary signage, noise restrictions and dust management policies.
Class A and Class B mall properties can and will continue to be valuable pieces of real estate if their owners properly place capital investments and continue to redevelop the property to meet the changing needs and demands of consumers. Most national REITs have a high density of properties in geographic regions that are considered growth areas, such as California, the Northeast, Texas and Florida. These areas will continue to experience growth in the retail sector as jobs and housing continue to grow, so keeping shopping centers up-to-date and well-developed in these areas can bolster a shopping center’s success.
By creating a mall that goes beyond what online shopping can offer to a customer, shopping center owners can help their properties stay viable for many years to come. Plans that include experiential, entertainment, food and beverage, and even residential options will help these owners make the best of their properties. And keeping the remainder of the mall open while one area is under construction will keep shoppers interested, even while progress is being made on the new development.