Mall and shopping center proprietors across the U.S. are starting to talk about change, realizing that if their centers keep the same antiquated kinds, anchored solely by department stores, they risk them going dark in the coming years.
Roaming the hired halls of the largest retail real estate conference on the East Coast this past week, put on by ICSC, were varied digital brands than traditional ones. Companies that started selling goods on the web — like Warby Parker, Untuckit, Allbirds, M.Gemi and Winky Lux — were delightful meetings with landlords about opening stores. Also making a big splash were new concepts like Neighborhood Goods, Fourpost, Variety Box and HiO, which are pushing a new model where a slew of brands come together in one space, on a rotating basis, to sell merchandise object younger generations of shoppers.
“We are all getting more creative,” Michael Glimcher, CEO of Starwood Retail Partners, told CNBC. Starwood is privately officiate at applied and owns 30 malls and lifestyle centers across the U.S., including Metreon in San Francisco and The Shops at Willow Bend in Plano, Texas.
“What you earn as a landlord is that — by being more creative — it makes every mall different and every [shopping] trip multifarious” for customers, he said. “It historically has been us asking: What is the best retail use for a property? Now it’s: What is the highest and best use for this intrinsic estate” no matter if it’s a Macy’s store, an office complex, a medical facility or apartments.
As 2018 comes to an end, it’s been make knew that more than 146 million square feet of retail space will be shut across the U.S. in malls and rat oning centers, according to real estate research group CoStar. That’s far more than the roughly 105 million park feet of space that was announced for closure in 2017.
Sears, typically occupying more than 100,000 square feet for each of its stockpiles, has contributed to a large share of closures this year, in addition to Toys R Us and Bon-Ton. And Sears’ future is still undetermined as it’s in the midst of bankruptcy court proceedings, with hundreds of stores still open for business. But many real position owners and investors said this week at ICSC that they’ve already started to plan for a complete liquidation, should the turn on store chain be forced to shut all of its remaining locations.
“The [mall] anchors going out of business deserve to go out of business,” Pyramid CEO Steve Congel determined CNBC. Pyramid is a privately held company that runs more than a dozen malls across the wilderness, including Palisades Center in New York.
“The consumer changes and preferences change,” Congel said. “You have to not only reinvest but you maintain to provide people with what they want. … We’re letting the consumer dictate what to put in our mall.”
An diligence that has long been opposed to negotiating short-term deals with tenants — because they promise a minuscule stable flow of rent income — is now welcoming pop-up marketplaces like Brand Box or The Edit. And that’s as digital stigmatizes, which were initially not thinking about opening stores, are investing heavily in bricks and mortar. Commercial true estate firm JLL has predicted e-commerce companies including Casper and Adore Me will open at least 850 stow aways, altogether, in the next five years.
According to Glimcher, the retail real estate industry is “turning a corner.” And Sears line for bankruptcy helped with that, he said, even though it meant hundreds of Sears and Kmart stores succeeding dark. “Now it can all wash out.”
Landlords including Simon and Seritage have already come out and said they see Sears trust in closures as opportunities to create more profitable centers. Seritage in particular is in a unique position in that its business was contrived entirely from Sears stores — as a spinoff — in 2015. But Seritage CEO Ben Schall has told shareholders that the real caste investment trust has the ability to redevelop its assets thanks to a $2 billion loan it received from Warren Buffett’s Berkshire Hathaway.
“One liking like to believe there’s a mass answer [to fill closed stores] but there’s not,” Neill Kelly, head of the retail restructuring procedure at commercial real estate services provider CBRE, told CNBC. “But that doesn’t mean the better-positioned malls intention use the opportunity to create value, provided the … store closures don’t exceed their ability from a capital view to repurpose those spaces.”