Read the article “Mall Owners Push Out Department Stores”
Take a ‘field trip’ to a local/regional mall to observe, firsthand, some of the trends that are happening in the retail industry. Think about what has been changed compared to 5-10 years ago or/and recently: stores, retailers, designs, decoration, layout, patrons, what they do etc. Write a brief report on your observations and readings following the template
Why the trends/changes happened
Recommendation for mall owners/department stores/retailers
Take THREE photos that would illustrate the changes and put in the appendix of your report.
The report must be typed and is limited to 2 pages (not include appendix) in a font (Arial recommended) of 12 with standard margins, double space. Expanded bullet points are preferred to text intensive documents.
Mall Owners Push Out Department Stores; Fast-fashion chains, restaurants, specialty stores do a better
job of driving mall sales and drawing shoppers
Kapner, Suzanne. Wall Street Journal (Online); New York, N.Y. [New York, N.Y] 11 July 2016: n/a.
At the Florida Mall in Orlando, Nordstrom was torn down and replaced with a Dick’s Sporting Goods store and a crayon-based family attraction called the Crayola Experience. The Saks
Fifth Avenue was demolished, too, to make way for a dining pavilion with 23 restaurants. And Lord & Taylor was carved into space for American Girl, H&M, Forever 21 and Zara. Once
the linchpin of American shopping malls, department stores are being displaced by newer types of retailers that do a better job of driving shoppers to the centers and lifting overall mall
sales. Landlords are nudging out the once-coveted big box chains in favor of sporting-goods retailers, fast-fashion chains, supermarkets, gyms, restaurants, movies theaters and other
types of entertainment as they seek to keep their properties relevant in an age increasingly dominated by online shopping.
“The definition of an anchor has changed,” said Stephen Lebovitz, the chief executive of mall owner CBL & Associates Properties Inc. “Cheesecake Factory does as much business
as Sears used to do.” CBL subdivided a former 182,000-square-foot Sears store at the CoolSprings Galleria in Franklin, Tenn., into smaller sections that now house American Girl,
H&M and the Cheesecake Factory. Simon Property Group Inc., which counts the Florida Mall among its properties, has replaced 50 department stores over the past 15 years, or
about 11% of all the department stores at its centers, with tenants that include Primark, Target Corp. and Forever 21 Inc.
Department stores choose to close their mall stores for various reasons. In the case of the Florida Mall, for instance, it was Nordstrom’s decision to leave, according to a company
spokesman. But in other cases, mall owners are actively buying out department store leases, real estate executives said. “The dependence of malls on department stores isn’t what it
was 25 years ago,” said Sandeep Mathrani, CEO of another big mall owner General Growth Properties Inc. Since 2011, General Growth has taken back space from 65 department
stores, or about 15% of its anchors, and filled the locations with new occupants that include H&M Hennes & Mauritz AB, 24 Hour Fitness, Wegmans Food Markets Inc., Dave & Buster’s
and other restaurants. Malls were once so reliant on department stores that some of the earliest shopping centers were built by the retailers. A predecessor of Dayton-Hudson Corp.,
which operated department stores before selling them and changing its name to Target Corp., is credited with building the first enclosed shopping mall in the suburbs of Minneapolis in
Mall development was often contingent on securing department stores as anchors in the hopes their prestige would attract other tenants and, eventually, shoppers. As a result,
department stores either owned their mall stores outright, or paid little rent, real-estate executives said. But as storied chains such as Bonwit Teller & Co. went out of business
and others such as the May Department Stores Co. were acquired by rivals, the pool shrank. At their peak in the 1980s, there were 56 department store nameplates, Mr.
Mathrani reckons. Today, the number has dwindled to roughly a dozen. The remaining chains have closed hundreds of stores in recent years, as they grapple with online
competition from Amazon.com Inc. and changing consumer tastes that have made department stores seem antiquated.
At General Growth malls, department store sales fell 1.9% for the 12 months through March, compared with a 4% increase at the specialty stores that line its malls. From 2005
to 2015 the disparity was even starker, with department stores sales dropping 10% compared with a 33% rise in specialty store sales. Mall department stores aren’t dead,
however. At 229 malls that real-estate tracking company CoStar Group Inc. examined over the past decade, one department store brand replaced another in 46% of anchor
space that turned over. But the remainder of that space, or nearly 54%, went to non-department store occupants such as food, home furnishings and sporting goods.
Redeveloping anchor space comes at a cost to landlords, but holds the promise of hefty returns as department stores paying as little as $2 a square foot in rent are replaced by new
anchors paying $15 to $20 a square foot, real-estate executives said. If the space is carved into smaller parcels for specialty retailers, rent can approach $100 a square foot. At the same
time, the new, more productive tenants help lift sales at the overall mall by pulling in more shoppers, the executives said. CBL spent $32.8 million on its share of the redevelopment of
CoolSprings, which it owns with pension fund TIAA-CREF, according to a presentation it prepared for investors. The mall’s sales per square foot rose 15% to $543 in 2015, the year the
remodeled Sears space opened, from the year before. Dick’s Sporting Goods Inc. has been snapping up space formerly occupied by department stores. “Penney, Kohl’s, Sears, Macy’s, a
few of them have announced store closings, there’s going to be real estate out there,” Dick’s CEO Ed Stack told analysts in May.
Department stores aren’t closing locations fast enough, according to research firm Green Street Advisors, which estimates that the chains would need to shutter roughly 800 stores, or
about a fifth of mall anchor space, to regain the sales per square foot they had a decade ago. Many department stores have long-term leases with multiple renewal options at belowmarket
rents, which enables marginal stores to continue to operate for years. For instance, more than half of Sears Holdings Corp.’s leases expire in less than five years, but it has
renewal options for the next quarter-century, according to its financial filings. Sears Holdings pays $4.29 a square foot in rent on stores that are part of the Seritage Growth Properties
real estate investment trust it set up last year, according to John Kernan, an analyst with Cowen & Co., and a Seritage investor presentation. That compares with other Seritage
tenants that pay $12 to $24 a square foot. “Landlords have tried to be more active in buying back space,” said DJ Busch, a senior Green Street analyst, “but there is a big gap in what
they are willing to pay and what department stores are asking.”
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
Credit: By Suzanne Kapner
(c) 2016 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.