Main Streets are Mean Streets, and Malls are Meandering with Lower Market Share These Days.
Professional commercial realtors see expeditious planning and execution as key to avoiding blight and preserving property values.
A June report from Credit Suisse estimates that between 20% and 25% of the nation’s shopping malls will close in the next five years as shoppers’ habits continue to shift from in-store to online buying. Traditional mall anchors such as Macy’s, J.C. Penney, and Sears have announced widespread store closings in recent months, and a number of niche clothiers like American Apparel and BCBG Max Azria have filed for bankruptcy. The report estimates that around 8,640 stores will close by the end of the year. These problems will be particularly acute in retail-intensive areas like shopping streets and malls, the report states.
“It’s now a known and accepted fact that online shopping has changed both the presence and the form of bricks-and-mortar retail outlets in the United States—including Florida—and it will continue to do so,” says Brian Andrus, President of the Florida Gulfcoast Commercial Association of Realtors (www.fgcar.org/) “Property owners and municipalities should not be caught asleep at the wheel. There are developers, entrepreneurs and municipalities today who can engage with the vast talent inherent in the commercial real estate professional community in Tampa Bay to take action.” He continues to explain that it is negligent to do otherwise and thereby inherit the inevitable shuttered stores, vacant buildings and sites that can become blight and result in the decline of the physical asset’s value, as well as that of property values. Brian Andrus operates a brokerage in Clearwater and is a licensed real estate broker in both California and Florida, having also earned the CCIM (Certified Commercial Investment Member) and the ALC (Accredited Land Consultant) accreditations (both volume transactions of commercial properties and land).
A spokesman for a New York investment group, who asked to be unnamed for this article, laid the problem on the doorstep of the State house, saying: “New York’s taxes, minimum wage expenses, its cost of benefits and mandates, its sales tax, and all of the red tape required to operate here give retailers nothing more than reasons to either close, use robots, consolidate or just shut down and leave. The retail sector needs help to hold its own and to sustain New York’s Main Streets and Commercial rental vitality.”
It is widely known that the closing of mall anchors like Macy’s and Sears has a ripple effect. Once a department store goes vacant, life can become extremely difficult for middle-mall retailers like nail salons, jewelry stores, and the like—those who to some degree depend on traffic from the larger stores.
According to an article in the Atlantic, from rural strip-malls to Manhattan’s avenues, it has been a disastrous two years for retail.
“There have been nine retail bankruptcies in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy. Last week, several apparel companies’ stocks hit new multi-year lows, including Lululemon, Urban Outfitters, and American Eagle, and Ralph Lauren announced that it is closing its flagship Polo store on Fifth Avenue, one of several brands to abandon that iconic thoroughfare,” the article points out.
A deep recession might explain it all, but the GDP is way up, as is income for lower and middle class citizens.
Here are three explanations for the recent demise of America’s storefronts, presented by the Atlantic in its April 10th issue in the piece penned by Derek Thompson.
“1. People are simply buying more stuff online than they used to; 2. America built way too many malls; 3. Americans are shifting their spending from materialism to meals out with friends.”
The writer concludes, very astutely we believe: “There is no question that the most significant trend affecting brick-and-mortar stores is the relentless march of Amazon and other online retail companies. But the recent meltdown for retail brands is equally about the legacy of the Great Recession, which punished logo-driven brands, put a premium on experiences (particularly those that translate into social media moments), and unleashed a surprising golden age for restaurants. Finally, a brief prediction: One of the mistakes people make when thinking about the future is to think that they are watching the final act of the play. Mobile shopping might be the most transformative force in retail—today. But self-driving cars could change retail as much as smartphones. Once autonomous vehicles are cheap, safe, and plentiful, retail and logistics companies could buy up millions, seeing that cars can be stores and streets the ultimate real estate. In fact, self-driving cars could make shopping space nearly obsolete in some areas. CVS could have hundreds of self-driving minivans stocked with merchandise roving the suburbs all day and night, ready to be summoned to somebody’s home by smartphone. A new luxury-watch brand in 2025 might not spring for an Upper East Side storefront, but maybe its autonomous showroom vehicle could circle the neighborhood, waiting to be summoned to the doorstep of a tony apartment building. Autonomous retail will create new conveniences and traffic headaches, require new regulations, and inspire new business strategies that could take even more businesses out of commercial real estate. The future of retail could be even weirder yet.”
According to Morningstar Credit Ratings, the U.S. has the greatest amount of retail space per capita—23.5 square feet per feet per person—of any country in the world. Canada is second, with 16.4 square feet per person, followed by Australia’s 11.5 square feet—less than half that of the U.S. Some feel there may be a longer way to fall before the industry hits bottom.
The wrong response to this situation on the part of property owners and/or municipalities, Andrus notes, is to overthink it. The best approach is to engage in creative repurposing, a term now commonly used and illustrated both inside and outside of Tampa Bay—an example being spots where slowed shopping activity has moved away from strictly shopping to creating a more experiential destination. Take Grapevine Mills, located two miles from Dallas/Fort Worth Airport, which has more than 200 retail outlets and restaurants, but now offers a Sea Life aquarium, a Legoland, and an amusement center that features 24 lanes of bowling, billiards, video games, and a karaoke studio.
“Just one of several good-news pieces is a New York Times study that rated the Tampa Bay area as the fourth fastest-growing job market in the U.S. Like everyplace else in the country, we’re confronted with a fundamental change in people’s shopping habits,” Andrus points out.
He added, “I have seen some municipalities overthink and overanalyze what to do. They need to play to their strengths—land use, zoning, utilities, roads, etc.—and step back and provide opportunities allowing the private sector to participate. Developers, entrepreneurs and others of the private sector bring their specialties and strengths—capital, creativity, and plans upon which they take on the risk/reward burden. The link between these two is the professional expertise of commercial real estate practitioners who are daily working out ideas and providing possibilities to both sides.”
The wrong, fatalistic way to look at it is that the future simply arrives on its schedule, not ours. Rather, by being pro-active and engaging the impressive amount of talent, we can create our own desired future. Malls and centers may indeed morph from purely shopping venues to destination sites with more entertainment value, or they may become something different. Regardless which way it goes, the point is that we can put it there—the major players must move forward in an expedited, efficient manner. That is common sense. It means much more face-to-face sessions and other forms of collaboration, such as roundtable discussions and summits of participants that result in action plans from passionate leadership and not just more yak. Andrus explained that to lessen current and potential blight and make the future something people want, participants would be prudent to seek input from commercial real estate professionals. They exist as a link between municipalities and the private sector.