Has America Built Its Last Major Mall?
It has been three years since a major new shopping mall opened in the U.S. Despite some early success, the project could be the last of its kind.
Luxury mall operator Taubman Centers Inc. TCO -0.70% constructed the 862,000-square-foot Mall at University Town Center in Sarasota, Fla., after years of planning and a number of studies showed the region was underserved by retail and would continue to enjoy population growth.
Taubman started working on the project in 2004 but had to pause during the financial crisis, and conducted another study in 2010 before plunging ahead. The mall had space for four department stores, but in the end Taubman went with three— Macy’s , Saks Fifth Avenue and Dillard’s —and devoted the remaining space to parking.
Despite the strong performance, however, Taubman, a real-estate investment trust based in Bloomfield Hills, Mich., doesn’t have any other mall projects planned in the U.S.
“We have every expectation that not many malls are going to be built, but we didn’t expect this to be the last,” said Bill Taubman, chief operating officer of Taubman Centers.
Appetite for building enclosed malls of more than 800,000 square feet has dried up. Department stores, once dependable foot-traffic generators, are closing locations amid stiff competition from off-price retailers and the growth of online shopping.
A mall construction spree in the 1970s and 1980s has left in its wake aging properties at a time when there is little capital available for upgrades. As anchor stores close, more mall space sits idle and foot traffic wanes, hastening the march toward death.
In all, there are roughly 1,200 malls in the U.S., and some analysts see the figure bottoming out at 500 to 800.
As of the current quarter, there were 612 so-called superregional malls, which typically have a gross floor area of 800,000 square feet or more, only two more than there were in 2010. Between 2002 and 2009, there were 37 such malls built. The number of smaller enclosed malls of 400,000 to 800,000 square feet stands at 599, up by 16 since 2010. Between 2002 and 2009, 40 such malls were constructed.
Grade A malls in dense neighborhoods with above-average household incomes are still doing well, and their landlords argue that consolidation in the industry works in their favor.
The Mall at University Town Center, for instance, is benefiting from the recent closure of the Macy’s store at a competing mall, Sarasota Square, located 14 miles south.
“Most markets are already served by existing retail centers,” said Mr. Taubman. He said there will be major retail development projects in the future, but with a different model from the boxy, enclosed suburban malls of the past few decades.
In the New Jersey Meadowlands, mall owner and developer Triple Five Worldwide Group of Companies is building the American Dream, a long-delayed 3 million-square-foot mall expected to focus mainly on entertainment-focused tenants.
Another niche mall project is the Westfield World Trade Center mall located in a transport hub that opened in 2016.
But unless department stores figure out a way to reverse their sales slumps, it’s unlikely that many traditional enclosed malls will be built in the years ahead, analysts said.
The building of superregional malls has fizzled in part because of retailers pulling back expansion plans.
“There was a time you had a deeper bench of anchors, said Jeffrey Donnelley, managing director of real estate and lodging equity research at Wells Fargo. “But now not all of those anchors are in expansion mode, and even if they were, not every site works for them.”
Source: The Wall Street Journal, June 27, 2017 2:58pm
Author: Esther Fung
Image Credit: PR Newswire
Read More: https://www.wsj.com/articles/has-america-built-its-last-major-mall-1498589803