Retail Traffic

The Mall is Not Dead

Recent department store mergers and acquisitions and the influx of lifestyle centers have raised speculation about the imminent demise of the regional mall. It's not the first time. History shows there have been many threats to the viability of malls and they have all been averted. Regional malls are here to stay.

But changes must be made. Owners and landlords must understand the consumer, continually update the shopping center look and feel and constantly evolve and adapt to changing environments.

Play to Your Customer

Understanding the consumer has never been more critical. Although the combined spending power of Generation Y, those born between 1977 and 1994, and aging Baby Boomers, those born between 1946 and 1964, now represents greater than two-thirds of overall spending in the country, malls are generally doing very little to respond to their demands.

Lifestyle centers, or open-air boutique shopping centers, have been touted as the answer for Baby Boomers because they offer greater convenience and higher-end retailers than traditional regional malls. By renovating and improving regional centers with select elements of lifestyle centers — like sit-down dining, clusters of stores, increased upscale retail options, and most importantly, convenience — they can recapture the loyalty and improve their status among Baby Boomers.

What's being done, however, to attract Gen Ys to the mall — beside the traditional food court and cineplex? Often found within entertainment centers, interactive retailers provide Gen Ys with variety. Regional malls that adopt this cultural shift and welcome these retailers, namely big-box bookstores like Barnes & Noble and Books-A-Million, the Virgin Mega-stores and specialty theaters like IMAX and Landmark's art film houses, will continue to gain the loyalty of Gen Ys for years to come.

Update the Look and Feel

Another critical element in maintaining the viability of a center is appearance. Updating malls every 20 years is not enough to maintain consumer interest and fend off competition. Furthermore, property owners and retailers understand that the standard 10-year lease term, while desirable, is no longer ideal due to the fast- changing needs of the consumer. Three- to five-year lease terms are becoming more common, a trend that is positive for both retailers and owners. Retailers can introduce new concepts to capture specific emerging consumer groups, and mall owners have the opportunity to re-merchandise the center in response to market demands.

While long-term survival will require astute attention and, perhaps, significant changes to a property, the country's Class A malls still dominate their markets with sales of $500-plus per square foot and record low vacancy rates. In fact, the industry hit its lowest vacancy rate in three and a half years, falling to just 5.3 percent and rents rising to $37.89 per square foot. Class B malls are being pulled along by Class A malls, with sales increasing to the mid- $300s per square foot from the low $200s. Retailers are finding greater opportunity and lower occupancy costs in Class B malls and some Class C malls. And finally, the industry would benefit from the reclassification of Class C malls to C+ and C-. Malls in good locations that are being revitalized with alternative anchors should be classified as Class C+ and the malls that have sales below $200 per square foot and suffer from decreasing occupancy rates should be classified as C-. These centers often present great opportunity for reinvention as power centers and entertainment centers.


Just as an exodus to the suburbs laid the groundwork for the country's first regional shopping center in 1955, today's revitalization of downtowns has enticed people to move closer to work and back to the city. Gen Y, a population more comfortable with mass transit, is seeking city living along with the value and convenience provided by suburban malls. As a result, the definition of the regional mall is expanding. Now developers and retailers alike are turning their attention to the opportunity of in-fill locations and the phenomena of “new urbanism,” which is defined as locations in urban settings that have been developed into 24-hour live-work-play environments. Mixed-use projects like the 138-acre Atlantic Station in downtown Atlanta offer the consumer specialty retail, restaurants and entertainment options beyond standard mall fare. These 24 hour live-work-play environments also offer retailers access to consumers throughout the day, not just during a lunch hour or on weekends.

A recent Florida State University study of new urbanist communities there indicated that residents preferred to shop within their communities. The majority of these consumers have bachelor, graduate or professional degrees and incomes over $100,000; 95 percent of their purchases were made within their own communities. While these consumers went outside of their local area 70 percent to 72 percent of the time for wider store selection and greater merchandise variety, only 57 percent ever ventured out due to price. When surveyed, these consumers primarily wanted specialty stores to enter their market with an emphasis on apparel — which bodes well for the regional shopping center.


History suggests that as an industry, shopping centers — and specifically regional malls — are slow to change. In many ways, the basic regional mall today does not differ significantly from its earliest incarnation.As a result, the regional mall's biggest challenge is its tendency to react rather than act. The consumer groups who wield the most formidable spending power — Baby Boomers and Gen Y — have clearly defined criteria for a favorable shopping experience. They look for convenience and a broad range of retail options, presented in a contemporary, exciting and interactive environment. Very simply, the owners and landlords of regional malls must seize these opportunities — and do it quickly, in order to sustain the mall's position as the retail real estate leader.

President of Jones Lang LaSalle Retail Group

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