How Will Malls Handle Vacancies from Bankruptcies?
Sears, Charlotte Russe, Gymboree, and Payless ShoeSource all have one thing in common aside from being once-popular retail chains—they’ve all undergone some form of bankruptcy within the past year. With the rise of online shopping and easier access to the latest fashions and everyday things we need, most people would not bat an eye at the thought of another retailer closing its doors for good. However, what about the shopping malls that often house these closing businesses?
In many malls across America, “going out of business” signs are becoming more and more popular after the highly-publicized closings of major retailers. In fact, according to real-estate research firm Reis, at the end of last year the vacancy rate at regional malls across the United States was around 9 percent. That is up from less than 8% in 2016. And the trend is continuing, as the last two quarters of 2018 had the highest mall vacancy rates since 2011, when it reached 9.4 percent.
Now, a non-traditional shift is happening within the retail world in order to potentially save these shopping malls from further vacancies. Owners are finding that looking into what local communities want to see could be the answer to this developing problem. Pamela Danzinger, founder of Unity Marketing, agrees with this sentiment, stating, “I think that the secret, the real way malls are going to be able to pivot toward the future, is to look much more locally at how those mall locations can serve the local community.”
The focus, however, is not on shopping, but rather the experience as a whole. In a new national trend, more and more malls are opting to focus on entertainment spaces such as mini-casinos, hotels, more sit-down restaurants, and even gyms and healthcare facilities.
For example, at Hamilton Place, a mall in Chattanooga, Tennessee owned by CBL Properties, Dave & Buster’s is slated to fill a spot once formerly occupied by Sears. Additionally, the arcade and restaurant space will also bring in a boutique-style hotel with 145 rooms.
In Seattle, Northgate Mall will soon house offices, residences, and open-space, as well as some shopping retailers. The Galleria in Pittsburgh is no longer a “traditional” mall, as it has opted to fill its empty storefronts with non-traditional tenants, such as an escape room, a church, and an insurance agent, among others.
In 2018, in-store retail sales topped $3.6 trillion according to Internet Retailer. But online sales continued to climb, reaching $517 billion for the year. Despite the growing trend of online shopping, mall owners nationwide are working to revitalize these empty spaces in the hopes that their doors will continue to remain open.
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