With the retail sector undergoing seismic shifts to its traditional bricks-and-mortar business model, large malls and shopping centers continue to seek out new ways to remain relevant in the future.
In West Michigan alone, the operators of aging malls have invested hundreds of millions of dollars into upgrades in the hopes of luring new users, ranging from specialty restaurants and grocers to fitness centers and even housing.
How those trends could affect the 1.2 million-square-foot Rivertown Crossings in Grandville remain unknown, as the mall’s owner, GGP Inc. (NYSE: GGP) of Chicago, has yet to say publicly if it plans any changes to the facility, which was built in 1999. However, GGP CEO Sandeep Lakhmi Mathrani said recently that he’s paying attention to the redevelopment of aging shopping malls.
“We will continue to lease, lease, lease, redevelop our anchor boxes, densify our assets and prune the lower quality assets,” Mathrani said in an August earnings call with analysts. “Scale has its advantages. Over time, our assets will be places to shop, entertain, discover, live, work (and) gather.”
It remains unclear if the company places the nearly 20-year-old Rivertown Crossings among its “lower quality assets” mentioned by Mathrani. The company has not mentioned the mall in its last three quarterly earnings calls, according to an analysis by MiBiz.
Executives at GGP and Rivertown Crossings did not respond to requests for comment by the time this report was published.
However, commercial real estate sources say they “see the writing on the wall” when it comes to the recent volatility of large-scale department store users and believe that change at Rivertown Crossings is both necessary and inevitable.
“Something is going to need to change there,” said Jeff Hainer, a senior research analyst in the Grand Rapids office of Colliers International Inc., a commercial real estate brokerage firm. “There’s some big trees that are going to fall there and that will definitely affect (the Grandville) area.”
Colliers does not work with GGP for leasing at Rivertown Crossings and has no specific internal knowledge of the company’s long-term plans for the facility, Hainer said. While some brokers in the Colliers office remain skeptical about the long-term viability of the Rivertown Crossings mall, it appears to be in no immediate danger, he added.
Across the country, 251 legacy department store locations have closed so far this year, and department stores have seen their sales fall by 40 percent since 2000, according to a September report by New York City-based research firm Fung Global Retail & Technology.
“Malls are still relevant, but the U.S. is overmalled and overstored,” according to the Fung report. “Increased competition from e-commerce, a lack of differentiated product, and a consumer base that is searching for value and craving experiences are forcing malls to transform in terms of format and offerings.”
Hainer agrees with that sentiment, noting that he could easily envision a scenario in which one of Rivertown Crossings’ large anchor tenants could close.
The ramifications in that scenario remain unclear, but Hainer said he believes an owner such as GGP would have to explore various possibilities for redeveloping the site.
“If they got notice that a big store was closing, that may accelerate the process,” he said, adding that despite the surge of headlines about store closures, there’s actually more stores projected to open than shutter this year. “Now is a time for opportunity rather than a time for exit.”
Given the rise of e-commerce and the effect it has had on bricks-and-mortar stores, mall operators have tried to breathe new life into their facilities through various redevelopment projects.
GGP CEO Mathrani has spoken at length on earnings calls about the company’s strategy of recapturing leases of troubled anchor tenants as a means of staying ahead of any potential store closures.
Rival mall owner Pennsylvania Real Estate Investment Trust (PREIT) deployed a similar strategy locally at Woodland Mall and across its national portfolio.
The Philadelphia-based PREIT said earlier this year that it had “recaptured” the leases of three Sears stores, including one at Woodland Mall in Grand Rapids. The Sears wing at Woodland Mall has since been demolished and will be redeveloped into space for multiple new tenants, including high-end department store Von Maur, as MiBiz has previously reported.
Other West Michigan malls such as The Shops at CenterPoint in Grand Rapids and The Shops at Westshore in Holland have successfully opted to “de-mall,” wherein the enclosed shopping centers are deconstructed allowing for a strip shopping center format and multiple outlot buildings.
In doing so, CenterPoint increased its occupancy by about 19 percent and now sits at more than 95 percent occupied, according to data supplied by Colliers International. Westshore has more than doubled its occupancy in recent years and is more than 80 percent occupied.
However, since Rivertown Crossings is a two-story structure, commercial real estate sources said the de-malling strategy could be difficult to pull off at the facility.
Ultimately, sources agreed that what’s playing out in the changing shopping mall landscape equates to consumer shifts away from ubiquitous shopping centers and more toward facilities that can deliver a unique experience.
Mathrani with GGP appears to agree.
“Our view on the retail property landscape is that high-quality centers will continue to win and thrive in this environment,” Mathrani said in an earnings call from May of this year. “We see it every day in our leasing activity. (W)e are seeing a continued flight to quality as they consolidate in the best locations where productivity can be maximized.”