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Here’s What’s New at Malls as Brick-and-Mortar Retail Evolves

Photo Courtesy of Pavel Losevsky.

The local mall is changing fast, along with consumer habits that were jolted in the pandemic, as traditional stores make room for nontraditional uses including apartments, warehouse clubs and self-storage spaces.

Adding different types of retail tenants to shopping venues is one way mall owners are trying to drive foot traffic as e-commerce grabs a bigger share of sales. And landlords are seeing more of their tenants try out new concepts to cut costs and drive revenue, such as smaller stores and so-called stores-in-stores, where a specialty retailer opens an outpost in a traditional department store chain.

Industry executives laid out the way the mall is changing in interviews with CoStar News and at panels at this month's ICSC New York conference at the Javits Center in Manhattan. One area of discussion included one of the most visible changes after the pandemic-induced retail slowdown: mall landlords either resuming plans to redevelop their properties or announcing plans to do so.

The reimagining of these sites invariably includes the addition of multifamily housing and, in some cases, office and restaurant space. There's a housing shortage in some parts of the nation, such as New Jersey, and more apartments help fill that void. "Retail follows rooftops," and malls are adding "rooftops" to provide more customers for their centers, Kristin Mueller, JLL's president of retail property management, told CoStar News.

There numerous examples of malls being transformed into mixed-use complexes. Earlier this year, global mall landlord Unibail-Rodamco-Westfield announced it had nailed down a partner to work on a massive reimagining of its flagship Westfield Garden State Plaza in Paramus, New Jersey. That update will include the addition of hundreds of luxury apartment units. And Unibail has similar plans in Chicago's suburbs at the Westfield Old Orchard mall in Skokie, Illinois. It will be demolishing a former Bloomingdale's site and replacing it with multifamily housing.

Tenant Curation

Traditionally, malls owners would put together somewhat cookie-cutter tenant rosters that included dozens of national chains, with large department stores as their anchors and a horde of specialty apparel, accessory and footwear sellers occupying the rest of the space. That approach doesn't cut it anymore in 2022 going into 2023, executives say.

Now, informed by data about their area's consumers, landlords are being more thoughtful about their tenant mixes, carefully curating them, looking for stores that will prompt frequent visits and will cater to local tastes and preferences, Barrie Scardina, Northeast regional president and head of retail services in the Americas for Cushman & Wakefield, told CoStar News. That could mean executing leases with a boutique fitness chain, such as Orangetheory, a real estate category that's been booming.

And so-called medtail, which refers to doctor's offices for people or animals in a retail setting, is opening at shopping centers. In fact, veterinary hospitals, and even vet urgent care centers, are increasingly popping up at retail centers as pet ownership soars. IV drip centers are also debuting at shopping centers nationally. It's all a balancing act for owners of those properties when it comes to choosing tenants.

Mall landlords are now even welcoming grocery stores and warehouse clubs. Those tenants generate frequent foot traffic, unlike an apparel store, as people often shop for food every week. A BJ's Wholesale Club just opened at the Willowbrook Mall in Wayne, New Jersey, and the Stew Leonard's grocery chain has a flagship at Paramus Park mall in Paramus, New Jersey. They are both in spaces once occupied by Sears.

“A decade ago, I wouldn’t have considered there would come a day when so many of our deals are food-related," Mike Conway, vice president of national accounts and retail partnerships at retail landlord Phillips Edison & Co., said in a statement. "The name of the game going into 2023 is really about four key categories — grocery, service, restaurant and health/fitness.”

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