Matthew Mason: Retail today: Staying relevant is key – RE Journals
Matt Mason published an article in RE Journals titled “Retail today: Staying relevant is key.”
Much has been written and continues to be discussed regarding the changing face of retail. Many of these conversations inevitably include regional malls – largely non-Class-A – across the country struggling to find their footing in the wake of retailer bankruptcies and store closings. Sears is the latest and most prominent example with its recent announcement that it will be closing scores of stores from coast-to-coast.
As mall owners and operators grapple with these challenges, I would argue that the problem is not the bricks and mortar retail model but, in a broader sense, that retail has failed to adapt to new realities. And I’m not talking just Amazon.
So what do we know? Things can be tough out there. Sears is whittling its portfolio down to about 300 stores. That means some 200 Sears locations are going dark, and possibly many more. When you consider the average gross square footage of each store at around 136,000 square feet, simple math tells us an astounding 27 million square feet of retail will soon be looking to be filled in the malls and shopping centers that formerly housed them. And when a major anchor vacates, the closure often acts as a blight for the entire retail center.
Exacerbating the problem, of course, is the fact that Sears and its affiliates often own that real estate, leaving the mall owner/operator largely at the retailer’s mercy for what happens next. Certainly, you can’t control what you don’t own. Plus, many times there are issues related to co-tenancy clauses in the contracts of a mall’s smaller retailers where rents are reduced when anchor traffic diminishes. Indeed, it can amount to a “double whammy” and the perfect storm that can reverberate throughout a property. In some cases it is a death knell for the center.
An example in suburban Detroit is the one-time Summit Place Mall. Originally opened in 1962 as one of the first enclosed malls in the state, the 74-acre site in Waterford, Michigan, encompassed nearly 1.5 million square feet after expanding in 1987 and 1993. In its heyday, Summit Place Mall was home to 200 in-line tenants and six major anchors including Marshall Fields, Sears, J.C. Penney and Kohl’s. By the 2000s, anchor closures had taken their toll culminating with Kohl’s finally vacating in 2014. The property was subsequently purchased but the mall continued to sit vacant for years as ownership debated the costs and challenges of retail redevelopment. That continued until the City of Waterford – obviously tired of inaction and the continuous erosion of its tax base – named the property to its “dangerous buildings” list. The site is now slated for demolition and, it appears, a potential tech park.