How Retail is Shifting: A Focus on Malls

A recent article in The Atlantic opened with this: “According to Ellen Dunham-Jones, an architect and professor at Georgia Tech, there are about 1,200 enclosed malls in the United States, and about one-third of them are dead or dying.”

The good news shared in the article, however, is that 211 malls are being retrofitted to accommodate other uses—some being used as colleges, medical centers, churches and even parks.

Re-imagining malls offers hope to what looks like a rather dim mall future. The prominence of e-commerce, the exit of department store anchors and the growing popularity of open-air, mixed-use developments all contribute to the demise of second-tier traditional malls.

Department Store Dilemmas

Department store chains, like Sears and JCPenney, are closing in second-tier malls and in secondary markets. The big-name retailers are experiencing diminishing store traffic as more people buy online. This is not necessarily bad for the retailer, but online traffic is really bad for the mall owner as fewer people shop the mall.

Struggling Malls

Sometimes when new retail hubs are developed, it causes already existing malls to struggle.

• One example is Georgia Square Mall in Athens. Originally the area’s primary retail center, the mall suffered when consumers were attracted to newer, open-air developments in the Epps Bridge Road area. With the action moving elsewhere, Georgia Square Mall must be creative to remain viable. Duluth’s Gwinnett Place Mall suffered a similar fate when the Mall of Georgia opened 10 miles up I-85 in Buford.

• Clayton County’s Southlake Mall is yet another older traditional mall suffering from changing shopping habits, a shift in the local buying power, and new retail developments. This mall was hurt by the home foreclosure crisis, which hit Clayton County hard, and by JCPenney’s 2011 closure.

• And what about Atlanta’s Cumberland Mall? When JCPenney left in 2005, the mall had to significantly pivot. The mall ownership responded by replacing the vacant space with a freestanding Costco. This was great for Costco, but not great for mall tenants who faced a considerable loss in foot traffic. Perhaps, the nearby arrival of SunTrust Field will alleviate the situation.

Malls Get a Facelift

Even owners of successful, first-tier malls have to be creative in response to the market and the modern day consumer.

• Perimeter Mall in Atlanta is in the midst of a multi-million dollar facelift incorporating more modern and upscale design with a stronger variety of food concepts. Perimeter Mall’s improvements coincide with the arrival of State Farm and Mercedes Benz who will occupy major office buildings nearby. Perimeter Mall also benefits from its accessibility to MARTA and the residential densification occurring on adjacent properties.

• Atlanta’s Phipps Plaza now has upscale restaurants, an AMC Movie Theater and LEGOLAND Discovery Center, thus adding an entertainment and dining component to the Mall’s classy shopping experience. Phipps Plaza also boasts a new, modern facade, featuring a backlit glass wall that highlights its most luxurious retailers. These changes are in response to the transformation of Buckhead into a 24-hour mini city.

Rethinking Mall Space

Some malls have been demolished in order to make the land still work.

• Shannon Mall in Union City is being redeveloped as a 25-acre film and TV campus and 1,100,000 SF distribution and warehouse facility. The project is being driven by former Turner Entertainment Group and Universal Studio executives. Shannon Mall closed in 2010 and has stood vacant ever since.

A seismic shift in the mall business is obviously occurring for both retailers and mall owners. For smaller markets where the mall was once the retail activity hub, this can be very bad news. In other cases, this shift creates opportunity for investors. But one thing is for sure—value-add pricing and major creativity is needed to ensure success.