By NICOLE MURRAY
Successful malls are offering more than a little retail therapy these days.
Shopping malls across the country have been forced to pivot their business strategies as inflation rates spike, retail spaces become vacant, and e-commerce grows in popularity.
Experts say malls have performed differently depending on their class.
According to Kelly Mangold, principal at RCLCO Real Estate Consulting, class A malls with exclusive, high-end luxury retailers with few vacancies have continued to perform the best.
“Malls tend to be successful when they are transformed into a one-stop shop for high-end goods that people cannot get anywhere else nearby,” Mangold said.
Class B malls, whose success relies on their anchor retailers, have struggled because, “their level of business is going to depend on the neighborhood’s success, the surrounding competition, and the average income in the area,” said Doug Ressler, manager of business intelligence at Yardi Matrix.
And class C malls which house smaller, specialty retailers are not only struggling but need to be prepared to make changes to survive in this competitive economy.
“Folks are looking for a bit broader experience. These small-tier malls usually have one type of product that you need. You went in, you bought it, you went home and that is not how people shop anymore,” Ressler explained.
Malls in urban areas are traditionally more likely to withstand rising costs because the median income of the area is typically higher.
On the other hand, Ressler explained that malls in suburban areas are now at an advantage because they can cater their stores and aesthetics to the surrounding clientele. He predicts that as a result, there will be a spike in suburban centers because of the new hybrid and work-from-home trends.
“People are staying closer to home and looking to shop more locally. If what they need is right down the road, then consumers will shop at these smaller malls because it is more convenient.”
For malls that are preparing to undergo a rehaul, there are quite a few options that have proven to be successful outside of the typical department store.
One of the most popular types of businesses being utilized is medical spaces such as urgent cares or doctor’s offices because a financial return is almost always guaranteed.
“Ask yourself, ‘What will bring people to the mall?’ The answer may not be shopping,” Mangold said. “We all need medical services, and it takes one appointment to get that person on site. The other retailers keep them there.”
Ressler adds that healthcare facilities usually sign for longer-term leases which helps keep prices down while bringing in a solid cash flow for maintenance and upgrades.
“There will always be an aging demographic and rather than overwhelm an emergency room or treat someone at a hospital, consumers can get the same service closer to their home at a cheaper price point,” Ressler said.
Another option for empty retail spaces is interactive experiences such as store pop-ups, arcades, and games that allow consumers to be hands-on. Mangold adds that these spaces need to be aesthetically pleasing to have any chance of survival.
“I have been to the Legos pop-up, the Dr. Seuss pop-up, axe throwing and all of it was made for social media. These are places specifically designed for the digital sphere; people may come in just to get that perfect photo. As people post, the business and the mall get more exposure,” Mangold said.
Upgraded movie theaters that veer away from the older, crammed set-up have proven to be successful. Ressler said, “People should be able to order dinner, have it brought to their seats, and enjoy larger, more comfortable chairs with a smaller crowd in each theater.”
Incorporating businesses related to fitness is also beneficial i.e., indoor fields, gyms, and courts.
“These fitness spaces are also implementing other concepts within themselves to generate foot traffic such as pickleball courts, social clubs, upscale bowling, mini golf; sports and games are huge,” Mangold said.
Similarly, the expectations for food areas have also elevated from the cafeteria-style food court to a more aesthetically pleasing food hall with local yet individualized food options.
Restaurants are now expected to invest in their appearance and serve higher-end food made with care as opposed to the once popular mass-produced fast food.
“When you went to the food court with Mom, it was to grab a pretzel and hit the road but that doesn’t cut it anymore,” Mangold clarified. “Now, consumers want higher-end artisanal and craft options because people want to feel cared about and fussed over. The food hall has become another area in the retail sphere that is now an experience.”
Other additional suggestions to consider when rehauling malls are parking lots or parking structures, businesses revolving around education and childcare, hotels, self-storage spaces, and even apartments.
“People want these live, work, eat, play neighborhoods all in one. The more areas of interest you offer, the better chance the mall be successful.”
As retail continues to evolve, Mangold remained adamant that businesses should veer away from housing a massive inventory and lean into e-commerce. Large department specialty stores have been hit hard because their inventory only serves a very specific niche in the market.
“Business owners need to monitor the trends and remain flexible so they can adapt as the market changes. For example, you now have no chance of survival without an online presence because shoppers prefer to purchase from the comfort of their homes. The ones continuing to evolve are the ones who are surviving,” Mangold said.
Read More Articles:
Hot Topic: Converting Office Spaces Into Residential Places
Beyond FICO: Predicting The Ability To Pay A Mortgage
Experts Weigh In: When Mortgage Rates Drop, Will Home Prices Surge?