Riverchase Galleria remains healthy despite flurry of store closings, mall officials say

Shoppers at the Riverchase Galleria in Hoover may have noticed a number of stores have closed in the past couple of months, but mall officials say not to worry.

Despite about a dozen store and restaurant closings early this year, the Galleria, which turned 29 this past week, is not dying like Century Plaza did in Birmingham, officials say.

To the contrary, numerous new stores are on the way, and the more than $120 million poured into the Galleria in the past few years has fulfilled the goal of giving the mall a rebirth and sense of vibrancy, mall officials say.

Riverchase Galleria officials will not release their occupancy rates, sales figures or traffic counts, but all are staying consistently high, Galleria Marketing Manager Angela Jacks said. "Traffic is steady. People are shopping. Sales are strong," Jacks said. "The mall's not going anywhere."

Store closings

Some eyebrows began to raise early this year when stores started closing their doors and advertisements and other coverings began filling vacant store windows.

The La Paz Mexican Restaurant & Cantina on Galleria Circle closed late last year. Then the Wet Seal, Body Central, White House Black Market, Rainbow and Delia's women's clothing stores inside the mall shut down, as did Banana Republic, P.S. from Aeropostale, Baker Shoes, Gordon Jewelry and the Sbarro pizza restaurant.

But this kind of activity is normal for the first quarter of the year, said Jesse Tron, a spokesman for the International Council of Shopping Centers.

Forty-four percent of all store closings happen in the first quarter as retailers go bankrupt and prune less productive stores, Tron said. Struggling retailers often will stay open through the Christmas season to haul in as much cash as they can during the busiest and most profitable shopping time of the year, and then close their doors early in the year, he said.

"It's always a flurry of activity. It definitely gives off that air of anxiety (as stores go vacant in a mall), but it's really business as usual," Tron said.

It's often the second quarter before you see other retailers snap up those vacant spaces and open their doors, he said.

New arrivals

At the Galleria, several new tenants already are lined up.

The Route 21 clothing store is moving into the spot where Rainbow was, while the Vans shoes, apparel and active sporting goods store store is taking over the P.S. from Aeropostale location, and the Jolie Grace women's boutique is moving into the Baker Shoes spot, Jacks said.

The Villa Italian Restaurant will be moving into the Sbarro pizza location in the food court, and the On Tap Sports Cafe at the Galleria is moving into the larger La Paz building on Galleria Circle.

Other shifts include Molly Green sliding over slightly from its spot next to Von Maur into the White House Black Market hole closer to the food court, and K's Formal moving into the Wet Seal spot.

There are other retailers who have deals in the works at the Galleria, but either leases are not signed or the retailers are not ready to announce, Jacks said. "We've got some really good ones coming," she said.

Naysayers

Some observers who claim the Galleria is on the decline say that the mall is full of too many young people who are just hanging out and not spending as much money and that the mall has been filling vacancies with too many discount retailers.

Jacks said the mall always tries to keep a good mix of tenants that can appeal to all income levels and age brackets, from people with children to empty-nesters. There are still plenty of high-end retailers such as Von Maur, Coach, Sephora and Michael Kors, but mall officials don't want to limit their pool of potential shoppers, Jacks said.

"We want everybody to find something at the Galleria - a place to shop," she said.

The Riverchase Galleria now has 155 stores, 39 kiosks and portable sales carts, 12 food vendors and one restaurant inside the 1.57 million-square-foot mall, Jacks said. There also are numerous restaurants and businesses on Galleria Circle, which surrounds the mall.

Enclosed malls remain viable

Tron said some people have been writing the obituary for enclosed malls ever since they first started being built. Time magazine had a cover in 1998 that said "Kiss your mall goodbye" due to online shopping, but in reality, malls are still doing very well as a whole, Tron said.

The national occupancy rate for enclosed malls is somewhere between 93.5 and 94 percent, compared to 92.5 percent for all shopping centers, Tron said.

Sales per square foot rose to their highest level ever -- $4.75 -- in 2013 and are expected to rise slightly to $4.78 per square foot for 2014 once those numbers are available, Tron said.

Because we live in a capitalistic society, there are always going to be some winners and losers and some malls that fail, but typically malls and shopping centers don't die because more people are shopping online, he said. Malls that fail typically do so because of market forces such as changing demographics in a community or an overall economic slowdown, Tron said.

It's not because shoppers prefer one format (such as open-air shopping centers) over another (such as an enclosed mall), he said.

There are still about 1,200 enclosed malls in the United States, Tron said. There are still some being built, such as The Mall at Bay Plaza (the first new enclosed mall in New York City in 40 years, which opened in August of last year) and The Mall at University Town Center in Sarasota, Fla. (which opened in November).

But there is not a lot of demand for new enclosed malls because most large markets already have them, Tron said.

Developers and investors seem to have learned some lessons from the recession very well - not to overextend themselves by building too much, too quickly the way they did in the 1990s,Tron said. Because of more prudent and controlled growth, rental rates are rising in most areas, he said.

Many of the older enclosed malls have learned to survive with renovations that keep them fresh and up-to-date or by adding new amenities such as entertainment options, he said.

Galleria renovations

Owners of the Riverchase Galleria - General Growth Properties and Jim Wilson & Associates - chose the renovation route.

As of August of last year, the Galleria owners had spent more than $65 million to renovate the property over the past few years, including $18 million for the Hyatt Regency Birmingham - The Wynfrey Hotel, said Robert Yeager, finance director of the city of Hoover.

Their investment spurred at least another $52 million in other renovations and construction by other companies on the Galleria campus, including $33.6 million for the new Von Maur department store, roughly $9 million for renovations at Belk and $5 million for the Earth Fare store, Yeager said.

The mall owners were required to file paperwork with Hoover detailing their expenditures in order to receive tax rebates granted by the city. City leaders agreed to rebate 50 percent of new sales tax revenues on the Galleria campus over 10 years, up to $25 million.

The owners and other companies had to spend at least $90 million on the Galleria campus for the owners to be eligible for the chance at a full $25 million refund, and even that refund is contingent upon growth in sales tax dollars.

Once the owners documented $117 million in qualified expenditures, the city quit counting because it didn't matter in regard to the tax rebate, Yeager said.

Tron said the fact that the Galleria owners were willing to invest so much money in the property is a positive sign for the mall's future.

"That would indicate to me that they have a lot of faith in that property, that they consider that to be a strong property for them," he said.

Jacks said the owners are indeed optimistic about the Galleria's future and believe their investment is paying off already.

Tron said that any mall with an occupancy rate above 90 percent is extremely healthy, while occupancy rates between 75 and 90 percent are fine. When occupancy rates start to fall below 75 percent, it may be time to start worrying, he said.

Some people say 60 percent occupancy is the point of no return, but Tron said there can be exceptions to that and that survival often is dependent on individual market conditions. If a mall is declining because of poor management decisions and not market conditions, a new owner sometimes can turn things around, he said.

Nine real estate investment trusts, such as General Growth Properties, control a majority of malls in the United States, according to the 2014 U.S. Mall Outlook report by the Green Street Advisors real estate research and advisory firm. Those malls owned by the trusts, whether wholly or in a joint venture, tend to be the better quality properties, the Green Street report said.

As the economy has recovered, high-end malls that appeal to upper-income shoppers have been doing very well, but malls appealing to lower-income households are more at risk as a diminished middle class finds itself with less disposable income and spends a stretched dollar often away from the mall, the Green Street report said.

The Summit

Just six miles up Interstate 459 from the Galleria, The Summit shopping center in Birmingham has an occupancy rate of 97 percent, said Bethanne Jenkins, The Summit's marketing director.

In 2014, The Summit saw four stores close - Juicy Couture, Coldwater Creek, C. Wonder and Cache, and the first three of those were due to national shutdowns.

The Summit added nine stores last year, including Orvis, Athleta, The Art of Shaving, Lilly Pulitzer, Calypso St. Barth, Kendra Scott Jewelry, Tumi, J. McLaughlin and fab'rik. Trader Joe's is on track to open in the fall in the Banana Republic space, and Banana Republic is moving near Michael Kors.

Lily Rain, a clothing, accessories and beauty retailer, is scheduled to open in May between Kate Spade New York and Lilly Pulitzer.

The Outlet Shops of Grande River

The Outlet Shops of Grand River in Leeds, which has 73 stores in 332,895 square feet of space, is doing extremely well, said Christine Szalay Strange, the center's vice president and general manager.

"The outlet sector is probably the healthiest of the market sectors right now," Strange said.

The outlet mall, owned by Daniel Corp. and U.S. Steel Real Estate, opened in 2010 during a very difficult economic time and has had some underperforming tenants, she said. But it has been working to help struggling tenants make it and recruiting new tenants to fill spots left by those who couldn't, she said.

Over the last couple of years, 11 stores in the outlet mall have closed, but 14 have opened, leading to a net gain in gross sales of $12 million, Strange said. The outlet mall is 92 percent full, including a Levi's store set to open in the former Aeropostale spot in March, she said.

Another 28,000 square feet of space is in the process of being leased, including a company that will move into a 10,592-square-foot space in late summer, but that store cannot be named yet, Strange said.

There are plans to expand retail opportunities at the Outlet Shops of Grand River in the next couple of years, she added.

From her perspective, it's important that all the malls and shopping centers in the Birmingham area do well, including the Riverchase Galleria, The Summit and Brookwood Village, she said. "It buoys the market" and helps draw in shoppers from outside the metro area, as well as additional retailers, she said.

Officials at Brookwood Village, like the Riverchase Galleria, declined to release their occupancy rate.

Reflections by shoppers

Shoppers have mixed reactions about the Galleria.

Ernest Sykes, a 62-year-old man from the Roosevelt community in Birmingham who was shopping at The Summit last week, said the Galleria has been a nice venue over the years, but he prefers the open-air shopping centers like The Summit.

"I can't deal with the crowds" at the Galleria, he said.

He likes being able to park close to the store where he wants to go, and get in and out quickly, he said. There are too many people to deal with inside the Galleria, and he doesn't like getting behind slow groups of people who take up the entire aisle going through the middle of the mall, he said. He definitely won't go to the Galleria at Christmas time, he said.

Eric Chamot, a resident of Birmingham's Crestwood neighborhood who works as a professor at the University of Alabama at Birmingham, said he's from Europe and prefers downtown areas with individual shops more than malls. However, those aren't very common in the United States, except for in historic towns, he said.

He likes being able to walk outdoors from shop to shop but doesn't like the gigantic parking lots at The Summit, or the busy main street you have to cross to get from one side of the shopping center to the other, he said.

Patricia Scott, a 26-year-old woman from Jasper, came shopping at the Riverchase Galleria last week with friends. She said she doesn't come to the Galleria much but likes it because it has so much more variety than any shopping center in Jasper.

Tracey Moss, another Galleria shopper from Calera, said she likes walking outside in the fresh air between store visits, like at The Outlet Shops of Grand River, when the weather is nice, but when it's cold or rainy, the Galleria is perfect.

Steve Trucks of Hoover said the stores at the Galleria offer a lot variety, quality merchandise and decent prices.

Plus, the traffic is less congested than on U.S. 280, and it has activities to help entertain grandchildren, such as the carousel and kiddie ride stations, he said.

"It's a good place to come where you can do a lot of shopping under one roof," he said.

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