What will happen to all the dying shopping malls across the country? They might become megachurches, their parking lots filled with worshippers. Or maybe construction crews will raze them and build multifamily developments on the land they once filled. Developers might add indoor amusement parks, high-tech bowling alleys or sprawling arcades to help bring new shoppers to them. Or maybe Amazon will swoop in and turn them into fulfillment centers.
None of these options for struggling malls would surprise Kees Janeway, managing partner with Iconic Real Estate in Detroit. That’s because Janeway has plenty of experience with indoor shopping malls and has seen them evolve over the years. This industry veteran formerly worked with major mall developer and owner Taubman Centers, where he was responsible for leasing a 28-mall national portfolio.
Janeway knows that the future of indoor shopping malls is cloudy right now. But he also knows that malls won’t disappear. What many struggling malls will do, though, is transform, often into a mixture of retail and other uses, everything from multifamily residential to office and entertainment.
The key is that malls will evolve but they won’t completely disappear from the U.S. shopping scene, Janeway said.
“After a disruption, which we are seeing now, new ideas often emerge,” Janeway said. “That’s what we will see in the future.”
Just consider the Cary Towne Center mall in Cary, North Carolina. It will soon become the headquarters of Epic Games, the company famous for developing online game Fortnite.
The Epic Games deal is a good example of how struggling malls, especially ones that have lost their anchor tenants, can be repurposed. Epic Games plans to convert the 87-acre Cary Towne Center into its new headquarters by 2024.
The gaming company purchased the mall from Turnbridge Equities and Denali Properties, a move that is just the latest chapter in the Cary Towne Center’s struggles. Denali and Turnbridge bought the mall in early 2019 in a distressed sale after the property lost three of its anchor tenants.
“Some of the ideas people have for malls will work, some won’t,” Janeway said. “But what I think is clear is that malls aren’t going away. They will exist. They’ll just change and adapt. They will draw a different mix of tenants.”
A big mall deal
A recent deal involving Janeway’s former employer, Taubman Centers, is a good example of the uncertain future faced by malls and their owners. Indianapolis-based Simon Property Group in late December finalized its purchase of an 80 percent ownership stake in the Bloomfield Hills, Michigan-based mall owner and developer Taubman Realty Group Limited Partnership.
This deal gives full ownership of Taubman Centers to Simon. This includes Taubman’s last two remaining Michigan malls, Great Lakes Crossing Outlets in Auburn Hills and Twelve Oaks Mall in Novi.
Janeway said that he wasn’t surprised by Simon Property Group’s pursuit of Taubman. As he says, David Simon, chairman and chief executive officer of Simon Property Group, is a smart businessman. He saw an opportunity to purchase luxury mall properties at a discounted price and jumped on it.
“If you look at Simon and Taubman, they are very different REITs,” Janeway said. “One is highly specialized in luxury retail. The Taubman Centers are typically the premier shopping malls in an area. Simon is more into abundance. Simon has more than 200 mall properties. They can’t all be top-of-the-market. From that perspective, this gives Simon a different type of mall property in his portfolio.”
Janeway said that the Taubman deal is further proof that shopping malls while they will change won’t disappear. Companies still value these properties.
“Look at the Simon deal. If I am trying to capture as many shopping dollars in a region as I can, having the key premium retail sites is important,” Janeway said.
Janeway said that malls after the pandemic will continue to do what they’ve always done, evolve. Instead of offering straight retail, they’ll continue to focus on experiences, bringing in bowling alleys that cater to adults, massive arcades, high-end restaurants and mega-sized movie theaters.
He pointed to the new American Dream Mall in East Rutherford, New Jersey, as an example. This mall had the unfortunate timing of opening in March of 2020, just before the COVID-19 pandemic began making headlines. The sprawling mall, though, is poised to thrive once the pandemic loosens its grip on the country.
The American Dream Mall has the retail you’d expect, with brands such as Saks Fifth Avenue, H&M, Forever 21, Hermes and Foot Locker filling its halls. But that’s just the start of what this mall offers. It also includes a Nickelodeon theme park, DreamWorks Water Park and, rather incredibly, an indoor skiing range.
“I was fortunate enough to walk that mall about two years ago when they were laying the tile in the main court and everything was more or less built,” Janeway said. “What they envision at that mall is more than a shopping mall. They are focused on the concept of giving people things to do and coupling that with retail. That, to me, is where the near-term future of mall real estate is.”
And, yes, this is a difficult time for malls as it is with all retail. But Janeway says that once the pandemic eases, people will return to malls and their movie theaters, arcades, bowling alleys and restaurants.
“People are social,” Janeway said. “The reality is that whether you believe in vaccinations or herd immunity or you believe the pandemic is all a farce, at some point we are all going to be social again. We won’t all be staying inside our homes all day. There are too many people who won’t do that. Ultimately, people will end up getting back together again. We are social. It’s what makes us human.”