Malls have traditionally been a place of discovery and community for shoppers. However, 20-25% of malls are projected to shutter within the next 5 years, according to a new report out this week from Credit Suisse, and mall owners are scrambling to rethink the long-term lease approach while still emphasizing the communal aspect that these centers are known for.
This new approach to how malls are structured is coming at a time when retailers are focused on experiential and short-term retail strategies to lure consumers – recent data from a ROTH Capital Partner’s Millennial Survey shows that 71 percent of millennials believe a significantly enhanced retail experience would increase their in-store visits and purchases. For mall owners, the solution to keep business afloat has been about embracing a pop-up store and mixed use concept to appeal to these experience-minded consumers and retailers.
1. Rethinking the ‘common area’ to increase revenue
Long a social hub, malls have always attracted hoards of people under one roof to shop and consume. Now, mall owners are checking off ‘experience’ as well, bearing down on new development plans that create malleable spaces to accommodate a mixed-use purpose and revolving roster of tenants that will usher in more consumer engagement and traffic. New features and additions include movie theaters, updated food courts, and limited-time-only stores designed to gather and surprise people, while increasing sales as well.
Not shying from the pop-up store trend, Westfield Century City opened a permanent pop-up space location right after its mega-successful experiment at Westfield Topanga: a pop-up concept by Kylie Cosmetics that saw more than 20,000 shoppers and generated 4 billion in media impressions. The property generated $1.03 billion in sales last year, and prompted the company to open up a dedicated space at Century City as a “place of discovery”, with over 1,000 square feet of space intended to create ‘moments’ for consumers to experience something new and create engagement, excitement, and buzz around the property. Since its inception, Century City has seen brands like Hermes and Aussie Collective powered by G’Day Collective, rent short-term spaces to test new concepts and brand opportunities, a win-win and promising relationship for both the mall owner and brand.
2. Controlling tenant turnover
While focusing on creating a better experience to drive sales, mall owners are also turning their attention to the empty spaces that once housed anchor-store retailers willing to commit to a 10-15 year lease. Such anchor tenants, like Macy’s and Sears, are increasingly breaking their leases, leaving owners to make these spaces as amenable to newer, short-term tenants as possible. Dedicating leasing offices for these short-term concepts, malls are now open to using pop-up stores to fill the vacant anchor-store spaces with immersive and experiential retail activations, driving both local and national brands alike.
By getting a better handle on filling the once long-held lease, mall owners can curate and create a better and diverse retail experience, with an increase in foot-traffic as a result. This updated tenant mix gives mall owners the opportunity to create the types of experiences that the digital landscape alone can’t offer, reviving malls as a whole.
3. The pop-up approach that’s here to stay
With an increase in sales, excitement and foot traffic, malls owners are using short-term and experiential concepts to give malls the facelift it needs to thrive in this new retail landscape. As retail is turning over more frequently than over before, redeveloping these centers drum up new business not only with added mixed-use attractions, but with short-term concepts that increase the mall’s visibility and keep it top of mind for local consumers.