The father of the American mall Victor Gruen, best known for Southdale Mall, had a greater vision ... [+]
There is little question in the minds of retail trend watchers and writers that the coronavirus has only hastened the inevitable demise or radical reinvention of our regional malls. I’ll spare you the nasty statistics surrounding the devolution of both the department stores and the specialty retailers, which are well documented. It is my intent to suggest a possible reboot for the retail format, whose original purpose has run it course. Ironically, one can gain insight to its rebirth, by going back to the founder’s vision of what was originally intended.
What Victor Gruen Intended
The Austrian-born Architect Victor Gruen, is credited as being the founder of the regional mall as we know it. Gruen is probably most famous for Southdale Center in Edina, Minnesota, a first-ring suburb of Minneapolis. Southdale is generally recognized as the first fully enclosed, climate-controlled shopping mall in the nation, and while that was certainly significant, its ultimate form fell far short of Gruen’s vision.
It was Gruen’s original plan, as I suggested in my book, to literally remake downtown Minneapolis in Edina. Starting with a nearly 500-acre tract of land, Gruen planned for the enclosed shopping center to be surrounded by housing, apartment buildings, schools, and medical facilities as well as natural amenities such as a lake and a park. The project was funded by the Dayton Development Company with ties to Minneapolis-based Dayton’s Department stores, Target’s founders. It is my belief that what is likely to happen to many of today’s surviving malls may become a microcosm of Gruen’s original vision.
The Cannibalization Cure
This first step is already taking place in select malls around the country, most of which lie in second or third ring suburbs. Large swatches of unused parking are being sold off to build market rate, or above market rate apartments and condominiums, which will continue. Also, former mall tenants such as RH (Restoration Hardware) have purchased “pads” in malls to build their fabled RH Design Galleries, thus creating destination locations outside of the mall’s walls.
The malls that are destined to survive, are already on a trajectory of turning over traditional retail space to non-retail service entities, which will further alter their mix and use. I have reported in the past, that Life Time currently has 20 projects in conjunction with Simon Property Group in various states of development, to take over anchor spaces in malls around the country. The prototype for this is the 143,000 sq. ft. $43 million flagship that opened at Southdale Mall late last year, on the site of a former J.C. Penney. Besides the ultimate fitness facility, it also includes a WeWork type office sharing facility.
I predict that once our current “work from home” experiment concludes, corporations will be reevaluating their need for mammoth corporate headquarters, and may indeed utilize office sharing as a means of cost savings. This would allow employees to work from, or closer to home, cutting long commutes; while helping sustain both the family and the environment, as well as cutting corporate overhead.
From Storing Goods to Staging Events
Both the rise and the fall of the mall had ubiquity at its very core. What was safe about its original formula, became a liability in a time of experiences, personalization, and of course the internet. Surviving malls will be forced to deal with wholesale vacancies, not by rounding up more of the usual suspects (because fewer will exist), but they will have to take a clean-slate approach. Permanence and stasis must give way to dynamic activity, even serendipity to attract Gen’s Y & Z, as well as make the venues viable in a world of unified commerce (omnichannel).
The growing interests in craft-made, recycled, repurposed, and highly personalized items will give rise to new makers-markets. One such example is Brooklyn, New York’s Makers Guild, a 25,000 square-foot space which includes thirteen artisan shops, where products are being made and sold. This kind of feature could be a draw and becomes another way to engage the audience.
The repurposed mall must focus on becoming an “event space” rather than a collection of static brands. Temporary tenants, pop-ups, marketplaces and the like, must become an extension of social media and influencer marketing. In fact, the stores will begin to behave more like media than places to store stuff. This, as the distribution and fulfillment of goods will depend more and more on the internet, regardless of where products are “sold.”
The Developer’s New Roles
Every mall developer will be forced to create incubators for new entrepreneurs to test products, concepts and service offerings. This means Retail as a Service (RaaS) should become common fare. RaaS has become a third-party launch pad (think b8ta) for digital first retailers to expose their offerings. The duration of these newbies may be measured in weeks or months, and unlike some previous venues like FourPost at Mall of America, the mall will have to take an active role in helping these entrepreneurs gain traction on and offline. Some may go on to become longer-term tenants, some may not.
The truly smart mall owners and developers have another unique and benevolent role to play as we begin to emerge from our bunkers. It goes without saying that there will be small independent retailers that may not make it. Many will be long term Main Street merchants with unique offerings and a loyal following. One of the most profound and positive turn of events would be for the deep pocket developers to cast a life raft to some of these tried and true local retailers, by giving them a short-term rent-free reboot in the mall. It would be an investment that could pay huge dividends for both.
Such a gesture not only would create goodwill but would begin to replicate the kind of diverse tenant mix that the early malls and centers had before the major specialty retailers blew them out. It would be kind of a karmic silver lining, as well as a win-win for all.
From Food Courts to Food Halls
Along with the possible demise of some small retailers as a result of the pandemic, is the likely loss of some of our best local restaurants. “So many restaurants will shutter, but the talent of their chefs and founders will continue,” predicts Forrester Research analyst Sucharita Kodali. “What you’ll see is (new) models"
The hunger for great food, along with “socialization-lite” might be fulfilled in large common areas. I could envision new-wave food halls featuring rotating star chefs doing fixed-price, reservation only dinners. Local chefs featured in grand mall open spaces, seems to pare well with social distancing and culinary showcasing. This too would be an ideal way for popular restaurant brands to live beyond the walls of their old digs and provide a new platform and income stream.
Amazon at the Mall?
It has been rumored for some time that Amazon is planning another retail blitz in the grocery category. An article this week in S&P Global Market Intelligence gave us a hint of the scale of the undertaking, along with Amazon’s fortuitous timing on the venture. A longtime adviser to the food industry named Bill Bishop of Brick Meets Click, cited an anonymous REIT board member who reported that “Amazon had agreements-in-principle for "’dozens and dozens’" of leases with the unnamed REIT.” This is allowing them to capitalize on many distressed properties. While the REIT in question is reported to have both strip centers and regional malls, the more likely location for the anticipated 35,000 square foot, heavily automated “click and collect” stores will be the ends of strip centers or vacated boxes.
Beyond Amazon’s new grocery concept, at some point we might expect them to “test” a new solution to their expensive, and cumbersome “last mile” problem. Turning a vacated mall anchor into a satellite distribution center could become a good “home base” for autonomous neighborhood delivery vehicles to get refilled and recharged. It would also limit the distance for drone delivery dispatch and package drop. Could happen.
