A brief history: In 1950, architect and developer Victor Gruen envisioned the first enclosed shopping mall in the United States, the Southdale Center in Edina Minnesota. Designed in response to the growth of the suburbs and the decline of downtowns as retail destinations, Southdale was envisioned as a new model of civic cohesion, boasting a post office, community amenities, shops and department stores. By all accounts it was a significant success, providing a comfortable indoor shopping environment. That was then.
Survival of the Fittest
This is now. In the intervening decades and the subsequent completion of over 1,200 shopping malls throughout the U.S., it’s time for the suburban mall to finally evolve. Despite the prosperity of malls over the past 70 years, the Covid-19 pandemic along with the impressive increase in online shopping, 25 percent of enclosed malls are likely to close in the next five years, according to The New York Times. Additionally, a record 25,000 store closures were expected in 2020 with 55 percent to 60 percent of those in American malls, according to Coresight Research.
Malls represent opportunities to redefine retail and consumers interaction in America and transform these major sites into their highest and best use as new community hubs in the suburban ecosystem.
It’s becoming clear that the basic premise of the mall is out of step with today’s retail and social realities: people driving 10-20 minutes to patronize an indoor shopping destination for several hours each day, eating, drinking and socializing in close adjacency to one another. It sounds like an absurd proposition when we now know social proximity can have adverse health impacts, and everything can be purchased from home with a few clicks of a mouse. Yet, that is precisely the model the current suburban mall is still offering.
The next decade will be the age of suburban transformation and mall owners need to create design transformations of urban and suburban retail centers into relevant mixed-use communities that go beyond mere rebranding. The immediate opportunities are to move beyond simply prolonging department store leases and underwriting failing stores.
Malls play a large role in our national retail psyche, they impact the design of our cities, and they are the single greatest opportunity to drive the evolution of the suburban landscape. Malls represent opportunities to redefine retail and consumers interaction in America and transform these major sites into their highest and best use as new community hubs in the suburban ecosystem.
Blueprint for the Future
We must move from critical mass to more of a critical mix and from scale to context. Consumers spend their money where they spend their time and with whom they trust to deliver relevant and meaningful services, offers and experiences. Commercial relevance is no longer about the share of wallet, it hasn’t been for quite some time, it’s about the share of the hearts and minds of today’s more complex and diverse consumer.
From our profession’s perspective, there are four blueprints for the viable future of malls:
1: Context-Specific Retrofits
Malls must become responsive to the context of the markets they serve. It may be appropriate to tear them down and create something new, or it may be possible to do a partial retrofit. Regardless, the standard elements of the mall (a few anchors, 12-plex theater, food court and rows of smaller storefronts) will no longer be enough to satisfy today’s demanding consumers. The repetitious layouts are losing their appeal and relevance. Mall owners must transition from property managers and leasing agents to curators of lifestyle community destinations, creating real and meaningful reasons for patronage. Simultaneously, new retail destinations must provide content with meaning for a consumer to give you their trust, time, share of their wallet and an ongoing desire to return week after week.
2. New Community Hub
A partial rebuild and repositioning the property as a new type of community hub creates a suburban village. This new village would offer the civic, residential and commercial amenities of a downtown, yet repositioned for a suburban audience. This may include governmental functions such as social services, permitting and administrative services. Other uses may include two-story mixed-use buildings with flex space over retail, complemented by amenities such as schools, daycare and other support functions. The redevelopment plan may include adding residential on the perimeter such as townhomes or condominiums. These uses can be strategically placed around new civic plazas and shared streets, creating an exciting and walkable village concept.
The realization of this model requires multi-disciplinary teams collaborating seamlessly, including economists, sociologists, designers, liberal arts scholars and real-estate professionals. This broader range of professionals can complement the typical retail disciplines of general managers, marketing, financial, leasing and development, ensuring the results are consumer centric.
3. Complete Evolution
The most radical solution is to simply clear the site and start over. The great advantage of rebuilding is the opportunity to reimagine the site holistically and build a new type of retail model that combines civic, residential and retail functions. This type of project merges the most desirable aspects of urban and suburban environments, combining the walkable, dynamic and socially engaging street experiences of our cities with the management benefits of a single property owner.
The design possibilities are tremendously exciting. A developer can reposition a site with the simple addition of residential units, creating a miniature town center environment where the residential can provide continuous support for the remaining retail. Or, for the more adventurous owner, civic elements can be added, such as schools, post offices, small parks and other shared civic amenities. A third strategy is to create additional office or tech-flex space, further providing a built-in daytime population to support the remaining mall retail.
4. New Business Model
Underperforming suburban malls can be transformed by management changes. That requires the landlord and commercial developer to include a wider spectrum of multidisciplined professional expertise and experiences in the management and operations of their properties.
The new role of the landlord-developer is not to lead based on scaling-up old retail models in order to offset costs based on scale alone. Leasing or filling stores with brands and seasonal promotional support is pre-Covid thinking. Traditional labels and definitions are limiting and set artificial limits the ability to look at the industry through a new lens.
The new model includes more flexible leases based on sales across the entire property, number of visits per month, a new kind of variable lease that goes both ways: traffic up, rent up, traffic down rent down, giving the landlord more responsibly to create traffic. consumer meaning, marketing support and ensure their creation and content of the property is and remains relevant. Leases linked to revenue, sales across the property go up, rent goes up, leaving it to the retail operator to drive penetration and conversation will not deliver the needed traffic.
The new landlord must be a merchant, marketer and creator of a truly unique destination with customized offerings of experiences, retailers, entertainment assets, services, food & beverage, hospitality, and community services across a wide spectrum such as, redefined workplaces, hospitality venues, residential choices and recreation crafted into a unique formula for each individual location. New business models and metrics need to be invented leading to a more content creation driven organization versus a suite of executives managing the highest and best use of location by location. Future mall owners and more than landlords. They need to become merchants, marketers, curators, content creators, innovative developers, and entrepreneurs.