HOUSTON – (By Dale King, Realty News Report) – Lots of enclosed regional malls across the nation enjoyed successful associations with the shopping public during the latter half of the 20th century by following a fairly simple formula: Offer a variety of stores, lots of convenient parking, a food court, a some restaurants with table service, heaps of sales and plenty of connections with the community.
As the millennium turned, a new form of purchasing – cyber-shopping – began to soar in popularity and keeps growing to a point where Black Friday and Cyber Monday are running pretty much nose-to-nose in consumer spending.
Online shopping, which has already shredded the ranks of Kmart, Sears, J.C. Penney and other big box giants, is threatening to knock malls off the map unless they change their ways and get their acts together.
A research team at Jones Lang LaSalle (JLL), the largest third-party retail property manager in the U.S., has studied 90 super regional and regional malls that are currently undergoing or have completed a significant renovation since 2014. More than half reported on renovation budgets, and of those, more than $8 billion has been spent upgrading retail space and realigning future ventures.
Several retail centers in Houston have evolved. And while they may not have followed JLL’s script line-for-line, they have picked up on the gist of the report.
In its research, JLL found that major mall renovations fall into four categories:
- Food and fun: Improve or add new food, beverage and entertainment options.
- Community connections: Change the way malls serve their communities by converting space into lifestyle and power center-like projects, adding non-retail uses to create mixed-use projects, dedicating space for community use or designing new open spaces.
- Facelifts: Re-brand to make malls more marketable through common area improvements, tenant upgrades and even name changes
- New uses: Partially or completely convert to other non-retail uses
An addition to the Galleria, Houston’s best-known mall, opened earlier this year. The new wing defies the trend in an industry struggling with store bankruptcies and shopping center vacancies. The $250 million Galleria VI segment, anchored by Saks, includes 35 luxury shops and several restaurants, many of which are new to the Houston area.
The Galleria expansion is part of a broader investment strategy by Simon Property Group, a real estate giant that operates the Galleria and about 175 other malls and outlets nationwide. The company has fended off vacancies and attracted new customers by pouring billions into its most successful properties.
Stacey Keating, director of public relations and corporate communications at CBL Properties, told Realty News Report: “In the Houston area specifically, we own the 1.1 million-square-foot Pearland Town Center. This property has apartment units, office space and a Courtyard by Marriott hotel above the retail. Additionally, we sold land to an apartment developer that built a 300-plus unit complex attached to the property.”
“From CBL’s perspective,” she said, “our strategy is to evolve our properties to include more diverse uses, including a greater focus on entertainment, food and beverage, health and wellness, cosmetics and other categories.”
“In some cases, where it makes sense for the market and the center, we will pursue the addition of office, medical office, residential or hotel components. As part of our planned redevelopments, we are currently negotiating with six hotels, one apartment, a grocer and five entertainment concepts over 20,000-square-feet.”
Keating said this is important “as consumer preferences continue to change. People are seeking more than just a shopping venue, they are seeking experiences and we have to constantly change our mix to satisfy that demand. Our goal is to transform our properties into vibrant town centers that offer a variety of uses and experience.”
CBL, a retail-center REIT based in Chattanooga, Tenn., believes experiential mixed-use properties are the key formula for success in the future.
“Our properties are not just about retail or shopping — they serve as gathering places for their respective communities,” said CBL’s CEO Stephen Lebovitz. “They are evolving through the addition of more food, entertainment, service, fitness and other new uses and we are actively exploring adding hotels, medical, office, residential and education components,” he added.
The mixed-use properties appear to be a big hit in the Houston area. A new third-quarter report by Transwestern says mixed-use centers have rising rents and the lowest vacancy rates of all types of shopping centers.
The JLL report says “some enclosed malls are just more popular than others. Top malls boast low vacancy rates and command significantly higher rents. For example, the 81 top tier US malls command average asking rents of $72.44 per square foot, more than 3.5 times higher than the average asking rent of the second tier of malls.”
“Mall performance,” the report says, “is based partially on the quality of the neighborhood in which it is located. There’s not much a mall can do to change that. But, improved aesthetics coupled with an appealing tenant mix, can affect footfall and a mall’s value.”
Generally, in the Houston area, the Galleria and malls such as Baybrook and The Woodlands Mall owned by General Growth Properties, have evolved and expanded as others flounder. Northwest Mall has been on a long decline that began years ago and the Greenspoint and San Jacinto malls have long been devoid of big crowds while plans for redevelopment have been brewing.
Nov. 27, 2017 Realty News Report Copyright 2017