An essential part of the suburban experience that grew out of the post-World War II years, the classic American indoor shopping mall has survived on a formula of anchor department stores surrounded by corridors of smaller retailers selling everything from athletic shoes to the Orange Julius.
Still a survivor amid growing e-commerce and online shopping, the shopping mall is slowly evolving with changing consumer tastes. And as some economically stressed anchor stores close, leaving large voids, some mall owners see opportunities to rethink how to fill vacant spaces.
“We don’t see the mall configuration changing dramatically overnight,” said Del Markward, president, CEO and broker of record for the Markward Group of Upper Macungie Township and president of the Washington, D.C.-based Society of Industrial and Office Realtors. “Rather, it is a gradual adaption to the needs of the consumers and the health of the stores that make up the malls.
“Malls will continue to morph in areas where shopping patterns have changed by adding groceries, entertainment, technology, restaurants, and, in some cases, apartments, warehousing and senior living complexes, to bring the consumer to the doorstep.”
There are about 1,200 traditional shopping malls in the United States. Malls and shopping centers have a significant effect on both local economies and the national economy – 1 in 4 jobs in the nation is related to retail real estate, and more than 20 percent of the gross domestic product is tied to the industry, according to the International Council of Shopping Centers.
And the properties support communities with nearly $200 billion in state, local and property taxes, which help fund essential municipal services.
HIGH OCCUPANCY RATES
The Greater Lehigh Valley is home to malls that support the local economy, have high occupancy rates, weathered poor economic eras and even expanded to adapt to changing expectations in the marketplace.
E-commerce has proven to be an opportunity for mall tenants and landlords, and a number of online-only retailers have occupied physical space to drive brand awareness and increase their customer base, said Stephanie Cegielski, vice president, public relations, for the International Council of Shopping Centers.
“Landlords are diversifying their tenant type by leasing to food and beverage and entertainment-based companies as well as fitness and grocery operators,” she said. “This is a response to changing consumer behavior more than to e-commerce.”
SEEKING AN EXPERIENCE
Most consumers, no matter their age, are looking for experience when they visit a mall.
“Millennials prefer to spend on experience, Generation X is looking for family activities and baby boomers are now empty nesters and seek experience,” Cegielski said.
Because of those expectations, malls are expanding food and beverage options to meet the variety of dining options, both sit-down and fast casual, that customers expect, she said.
“Fitness is another trend,” Cegielski said. “This includes large gyms but also yoga, barre and cycling studios.
“Some properties are adding hotels or housing, and a number are looking at how to incorporate health care facilities into their portfolio.”
REBOUND IN THE 1990S
Palmer Park Mall in Palmer Township, between Easton and Nazareth, opened in 1972 with 350,000 square feet of retail space, with two anchor stores, Clover and Hess’s.
It went through ups and downs in the 1990s but turned around with the arrival of Boscov’s in 1998, which nearly doubled the size of the old Clover store and led to a major mall renovation in 1999.
Today, Palmer Park Mall, owned by New York-based CityView Commercial since 2016, has 477,000 square feet and a 97 percent occupancy with 60 stores, including its two anchors, Boscov’s and Bon-Ton.
Jack Mitchell, Palmer Park Mall general manager, said the mall’s presence among neighboring residential areas has been key to its staying power. Other Lehigh Valley malls draw their customers from homes that are miles away.
“We, on other hand, step a foot outside our doors, and our neighbors are houses,” Mitchell said. “We have over 60,000 people within a three-mile radius of Palmer Park Mall and offer the convenience and easy shopping experience that you don’t have to plan a half-a-day around.”
Mitchell said the feedback he hears from his tenants is that business is good because customers still enjoy face-to-face interactions.
‘BRIGHT AND VIBRANT’
While Palmer Park Mall has stayed true to a traditional shopping mall blueprint, largely because of the customer-focused presence of Boscov’s that has rubbed off on other mall tenants, Mitchell said regional malls are evolving into different tenant mixes, including medical offices, tax preparation services and even hotels as anchors.
Palmer Park Mall does not have any major expansions planned, although it recently completed new entranceways.
“We’re trying to make ourselves look as we look inside, which is a very clean, bright and vibrant mall,” he said.
BON-TON CLOSING IN MONROE
Stroud Mall in Stroud Township this year will lose one of its three anchor stores, Bon-Ton. Bon-Ton Stores Inc. entered Chapter 11 bankruptcy protection this month.
Its Stroud Mall store is one of 47 locations that will close this year as part of the department store chain’s plan to improve performance and boost capital.
Anita Mead, general manager of Stroud Mall in Monroe County, said a number of scenarios are being evaluated for the Bon-Ton space but noted that it’s premature to announce plans.
OPPORTUNITY TO DIVERSIFY
Opened in 1978, Stroud Mall has 403,258 square feet of space and 92 percent occupancy, with its anchor stores, 47 small shops, two outparcels and a Cinemark theater. The mall, owned by CBL & Associates of Chattanooga, Tenn., had a strong holiday season and is trending up for the year, she said. About 3 million people annually visit the mall.
“As consumer preferences have changed, CBL’s strategy has been to add more experiential tenants to our properties,” Mead said. “Stroud Mall is no exception to that with the addition of Cinemark a few years ago. Our ability to recapture the Bon-Ton space now gives us an even bigger opportunity to diversify the mix of uses at Stroud.”
Like other evolving malls, Stroud has taken on nontraditional tenants, among them Beauty Institute, which opened last May. Originally, it was the Stroudsburg School of Cosmetology in Stroudsburg.
“We recently added Vision Church, a nondenominational church, and American Killer Bees, a martial arts studio, as well as Pink House, an antique and collectible store,” Mead noted.
SYNERGY WITH E-COMMERCE
Lehigh Valley Mall in Whitehall Township has remained competitive by working in tandem with its retailers’ online extensions.
“We don’t necessarily consider e-commerce a competitor,” said Lehigh Valley Mall general manager John Ferreira.
He added that mall owner Simon Property Group of Indianapolis, Ind., one of the largest owners of shopping malls in the nation, “is dedicated to continually investing in the customer experience.”
“Although online shopping offers convenience, we find that most of our customers still want to see, touch and feel items before buying,” Ferreira said. “Coming to the mall is an experience. You meet friends, go shopping, enjoy a nice meal out. It’s a chance to socialize and relax.”
An example of this was Lehigh Valley Mall’s addition of its Outdoor Shops in 2007, “which not only provided a fresh, new retail mix for the region but also an outdoor hub for the community to enjoy,” he said.
When Lehigh Valley Mall opened in 1976, the square footage was 1,045,393 for 121 tenants. Today, the mall is home to more than 150 retailers and encompasses 1,181,000 square feet and has an occupancy in the mid-to-high 90-percent range.
SPACE AT A PREMIUM
While Simon does not disclose sales or traffic figures, Ferreira said the mall’s tenants benefited from full parking lots during the recent holiday season and an increased number of visitors from outside the area.
“We’re fortunate to have a high occupancy rate, so space is at a premium for national, name brand retailers,” he said.
“We did just welcome a unique concept, Dragon’s Breath, which makes a cereal snack that is flash frozen with liquid nitrogen to create the illusion of smoke when you eat it. The vendor’s been a huge hit so far and is a fun complement to our current dining options.”
Even as times change, there will continue to be a place for shopping malls, despite the precipitous climb of e-commerce convenience, Markward said.
“Well-located Class-A traditional malls continue to thrive with the tried and true retailers around the country,” he said. “When an anchor tenant falls on hard times in these malls (Sears, J.C. Penney, Macy’s), the space is backfilled rather quickly with up-and-coming stores or new restaurants.
“The lease rates also continue to hold and slightly increase in these centers as demand continues to be strong.”
Class-B and Class-C malls are a different story. When large tenants leave these malls, it can be years before the space is reoccupied or repurposed, Markward said.
“We are seeing many malls turned ‘inside out’ where the core is torn down and replaced with smaller outdoor or lifestyle layouts,” he noted. “Additionally, some of these malls are converted to other uses altogether, like apartments, entertainment venues, call centers or warehousing.
“Zoning plays a role in these modifications and can take years of planning to effectuate the changes.”
Markward said it’s a misnomer that everything has to be adjusted for the millennials and younger shoppers.
“Everyone of all ages has different needs and preferences for the shopping experience and the malls, just as well as the e-commerce sites need to continually adapt to the current trends to achieve the foot traffic and eyeballs necessary to turn profits,” he said.
“… People still need to shop, but the options need to become more varied in markets where competition has moved the needle.”
Said Cegielski of the International Council of Shopping Centers, “the shopping mall will continue to evolve with the times, just as it has done for the past 60 years.”