From Doom to Vroom

 
 
 
 
 
It was November 2008. The headline in Newsweek asked, “Is The Mall Dead?”

The accompanying article painted a grim picture, pinning diminishing mall traffic on retail cannibalization, the repopulation of cities and assorted other problems.
The country’s regional malls were under intense scrutiny, and some were barely hanging on by a thread. Economic woes exacerbated doom scenarios as spendthrift shoppers who once kept malls humming suddenly turned frugal.

Eighteen months later, there are encouraging signs that U.S. regional malls have managed to stave off the grim reaper. They are once again attracting shoppers, now with a mix of tenants that includes everything from a tattoo shop to an MBA program, overhauled anchor spaces recast as gourmet food emporiums, over-sized specialty shops and fresh takes on services and entertainment that range from health clubs to high-end movie theaters.

March may have marked an important turning point for malls. The U.S. Shopping Center Executive (SCE) Opinion Survey Business Barometer, compiled by the International Council of Shopping Centers (ICSC), increased by 4.5 percentage points.

“After nearly three years of contraction, shopping center executives are finally optimistic on the current state of industry conditions across [key] performance measures,” says Michael Niemira, chief economist and director of research for ICSC. “Today, we’re a more efficient industry. We’ve learned to adjust for tougher times, and as a result we can look forward to a better outlook over the balance of 2010.”

The increase lifted the SCE business barometer to 52.6 percent, crossing the 50 percent growth threshold for the first time since July 2007 and suggesting that shopping center executives have begun to see improvements in year-over-year sales growth, customer traffic, occupancy rates, rent spreads and capitalization rates.

U.S. retail sales figures rose nearly 1 percent in March according to the NRF and were up 1.6 percent as indicated by the Commerce Department – the fifth such gain in six months. Shoppers, it seems, have begun to loosen the purse strings.

While the general consensus is that re-energized regional shopping centers will continue to have relevance, no one is ready to throw a party quite yet. Spirits are being tempered by high vacancy rates in many retail centers, near double-digit unemployment and inconsistent consumer spending.

Still, the recent spate of upbeat fiscal news and signs of change at U.S. malls leads Stacy Janiak, vice chairman and U.S. retail leader for Deloitte, to be hopeful about the future of shopping centers.

“Developers have gotten more creative with the space and it’s beginning to yield fruit,” she says. “Essentially, they’ve gone back to the genesis of the shopping mall and its origins as a social center that blends shopping and entertainment — even housing — in an enclosed community. Mixed-use properties, versus those solely focused on apparel shops, will give consumers a reason to come back again and again.”

Paco Underhill, founder of Envirosell, feels that U.S. developers have awakened to concepts used by their counterparts globally. “Having a food retailer as part of the mix is relatively new here, but in other parts of the world it’s standard,” he says. “U.S. shopping developers are coming around to the thinking that a diversity of purpose will drive shoppers to the mall.”