By Kenneth R. Gosselin
The Hartford Courant
WWR Article Summary (tl;dr) As Kenneth R. Gosselin reports, “shopping centers and malls, already duking it out for survival, found their bottom lines taking a big hit in the coronavirus outbreak as sales migrated online.”
Hartford
In the 1980s, shopping malls were the go-to destination, but a glut of building, the rise in online shopping and weakened anchor department stores had already chipped away at that heyday, a pace quickened by the COVID-19 pandemic.
“For a long time now, one of my comments to audiences that I give speeches on this is to say we’re not overbuilt, we’re under demolished,” said R. Michael Goman, a principal at Goman + York, the East Hartford, Conn., commercial real estate advisory firm, said. “We have to take some of this stuff down or it’s got to be converted to other uses.”
Shopping centers and malls, already duking it out for survival, found their bottom lines taking a big hit in the coronavirus outbreak as sales migrated online.
A new report from Coresight Research makes a grim forecast that the coronavirus outbreak is expected to increase U.S. store closings this year from an earlier estimate of 15,000 to as many as 25,000. As many as 60% of the closed locations will be in a mall, Coresight predicts.
The closures would be more than double the record 9,821 in 2019, according to Coresight.
Goman said shopping centers and malls are moving to respond to changing shopping patterns, some considering converting vacant anchor store space to delivery centers where shoppers can buy online from one or more mall tenants and pick it up in one place.
“You’re starting to see mall operators look at whether they can reconfigure their parking lots to include a drive-thru lane for parcel pick up, which makes a lot of sense to me,” Goman said. “A common delivery point, I think customers will respond well to that.”
Shopping malls also may further shift to more entertainment options, well beyond the traditional movie theater, responding to growing consumer preference for experiences over buying products.
“Top Golf,” where players score points by driving balls into targets, or Urban Air indoor trampoline centers are gaining popularity, and there is even the possibility of indoor skateboarding or skiing, given a large enough space and a big enough budget, experts say.
Whereas department stores once drew shoppers to the mall and thus, its array of specialty, especially apparel, shops, the draw could become the entertainment and perhaps even, higher-end dining the mall offers, Goman said.
The pandemic is at the heart of why shopping center giant Simon Property Group is backing away from its $3.6 billion acquisition of Taubman Centers.
James Sullivan, managing director at BTIG, the New York investment and research firm, said it is widely believed that Simon wants to renegotiate the price it had agreed to pay.
Taubman’s malls are largely enclosed, a concern as the coronavirus lingers without a clear timetable for a vaccine, Sullivan said. And Taubman also focuses on upscale shops, which are more likely to take a hit amid high unemployment, he said.
Sullivan said this year’s April-June quarter is expected to be the worst earnings quarter of the year “but the timing and strength of any recovery is very uncertain so clearly Taubman as a company will be weakened by the significant anticipated losses in the second quarter and perhaps thereafter.”
At Westfarms, a mall in West Hartford, Conn., owned by Taubman, officials say shoppers are returning to the mall on a consistent basis and now, four weeks after reopening, more than 60% of the stores have reopened. And, they say, they are taking all the measures necessary to keep shoppers safe.
“Despite the pandemic, we remain committed to keeping our merchandise mix fresh and providing new market retailer options for the Greater Hartford market and beyond,” Amanda Sirica, a Westfarms spokeswoman, said, in an email. “For example, currently under construction is Fabeletics, an activewear apparel inspired by actress Kate Hudson.”
There was widespread speculation that Westfarms could lose a major anchor tenant, the venerable Lord & Taylor, which appeared to be on the brink of liquidation. But some Lord & Taylor locations have reopened. The store at Westfarms remained closed last week.
Heather Addy, a shopper at Westfarms earlier this month, had lost none of her enthusiasm for mall shopping during the shutdown that kept her at home, and shopping online.
Addy was right back shopping at Westfarms when it reopened, and she had already been back a few times.
“It was boring to be home,” said Addy, who lives in Hartford. “I’m so happy they reopened. It was the best thing.”
Potential redevelopment
In the midst of the pandemic, two family-run real estate investment companies from Long Island purchased the struggling Westfield Meriden mall, off I-691 in Meriden, Conn.
Namdar Realty Group and Mason Asset Management, who own dozens of malls and shopping centers around the country, reportedly paid $12.5 million for the nearly 900,000-square-foot mall.
The purchase price raised some eyebrows locally, given its appraised value is $110 million and its assessed value is $78 million, according to city officials, citing public records.
It is unclear if the reported price was the full extent of what was paid. The buyers say they do not comment on what they pay for acquisitions.
“I do feel that COVID-19 had an impact on the valuation and sales price on the mall,” Joseph Feest, Meriden’s economic development director, said.
“Retail has been affected tremendously by this pandemic, and the amount of people allowed in stores is lessening their ability to make the income they had made pre-pandemic.”
In an email response to questions from The Courant, Mason said the mall is at a “crossroads” and that it plans “to do whatever is necessary to increase occupancy and continue elevating the mall.”
Mason acknowledged the pandemic has made shopping centers and malls vulnerable, but it still remains optimistic about the future.
“Malls are adapting, and vacant blocks are being repurposed with new and different tenants that seek to diversify the property’s offering,” the email said.
Namdar and Mason pursued a similar strategy in acquiring the Enfield Square mall, in even more dire circumstances than Meriden, paying $11.4 million for the 790,000-square-foot mall in 2019.
Laurie Whitten, Enfield’s director of developmental services, said the owners have told the town they are “diligently” seeking new tenants for the mall and plan to add housing to the site.
“We definitely want to see it built up and have many uses as possible,” Whitten said. “This is our central business district. We’ve got it set up that there will be different opportunities for funding, and we are going to be willing to modify our regulations if its meets our plan of conservation and development.”
Future planning
While hopes for redevelopment in Enfield and in Meriden are running high, some say towns and the state should be planning now for a potential opposite outcome.
John Clapp, a professor emeritus of real estate at UConn in Storrs, said a thoughtful, close analysis of new potential uses for malls and shopping centers should be in the works.
“West Hartford should have a plan for Westfarms, just in case, and certainly Manchester should have a plan for Buckland,” Clapp said. “What if things go dark? What should we do?”
One worry is just how long former retail properties should be allowed to remain vacant, Clapp said. The fallout is broad and deep, Clapp said, from the loss of employment and income to dwindling local property taxes and state sales taxes.
Clapp does see an upside for both Enfield and Meriden.
“If Meriden could somehow get a nice transportation link and convene frequent service to the new train station, that could become very valuable as a high-density apartment complex,” Clapp said.
While the challenges for malls loom, some say the strongest will survive because they adapted to the new marketplace.
“There are some malls that are still doing very well and definitely have seen a bit of a renaissance,” said Neil Saunders, managing director for GlobalData’s retail research division. “But malls as a whole across America aren’t seeing a revival because a lot of them, quite frankly, look exactly as they did in the 1980s, and they’ve really not moved on in terms of being an attractive destination.”
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Distributed by Tribune Content Agency, LLC.
