Up until recently, there has been a logic to the pattern of retail bankruptcies. In February of this year, Sharper Image, Lillian Vernon, Fortunoff – sellers of stuff we don't need - declared bankruptcy. The second wave included Linens ‘N Things, Bennigan’s, Steak & Ale and Mervyn's - sellers of stuff we could easily get at places we like better. All three entered bankruptcy in July. That same month, Fortune reported the third straight quarter of contraction for retail, according to Northern Trust economist Paul Kasriel. So retail technically was in recession.
With the entire economy now having joined retail in the dumpster, all retailers are vulnerable. The recently announced liquidation of Mervyn’s is just one more proof point that "Value" has become tablestakes and survivors will be the retailers that get the greatest productivity out of their assets – people, product, brand, and store.
As CNNMoney.com senior writer Parija B. Kavilanz, reported on October 16, “with thousands of stores closing in the economic downturn, the increase in empty space at the nation's shopping malls is leaving a hole in the hearts of once-vibrant communities.” And in some malls, store occupancy rates are reportedly falling below 75%, according to RCS Retail Real Estate Advisors.
For mall operators, it's time to find creative uses for all that space and ways to drive mall visits. Back in March, Kavilanz reported that CBL & Associates Properties, which owns about 80 malls nationwide, gave "a directive to its leasing folks to go out and pursue non-traditional retail uses both for its enclosed and open-air malls.”
According to the International Council of Shopping Centers (ICSC), spending on entertainment and self-improvement services tend to be fairly recession-proof. So, we are now seeing malls embrace those categories. They are experimenting with new movie theater concepts including some featuring oversized "love seats for two," wine and cheese bars, and medspas for a quick afternoon Botox fix. The number of mall-based medspas alone has jumped to about 2,500 from just 450 in 2004!
And, in what now looks like great foresight, Westfield Mall leased 145,000 square feet on the fifth and sixth floors in its San Francisco Centre to San Francisco State University to use for its downtown campus. This brings visitors to the mall during non-peak hours, and reviews on Yelp suggest the concept is a winner.
One thing is clear: The mall experience can't be just about shirts, slacks and shoes anymore.
The good news? Maybe our malls will become less cookie-cutter like and have more variety and more local appeal. There’s a chance that local tastes and preferences will be reflected in the new tenants and uses that malls attract. Anything that gets away from the homogeneous mall experience of the last 10 years would be an improvement!