Vacancies threaten shopping malls’ future

Empty malls from department store closures means a challenge for investors nationwide.

Shoppers in Tucson are seeing more big box stores such as Sears, Kmart, J.C. Penney and Macy’s closing down, and some local malls are suffering as a result.

Brigham Stevens, an analyst for Tucson-based investors, Bourn Companies LLC, which bought the Foothills Mall last December from Schottenstein Property Group, said the group hopes to provide a community center with additional uses other than just retail.

Tucson’s Foothills Mall currently looks like a ghost town, but Bourn wants to redevelop it into something that will attract people to the area once again.

“We see the trends all across malls, and how they’re under performing and so we don’t see the ideal solution of trying to lease-up the vacancies with additional retailers,” Stevens said. He said his company is focusing heavily on bringing in entertainment and restaurants aspects.

A recent research report on big-box trends showed that department stores occupy about 50 percent of U.S. shopping malls, and the next biggest occupancy is apparel and accessory stores. “These are the two slowest-growing categories in retail today,” according to the report by CBRE.

But some businesses show success in malls today.

“In retail, restaurants have been the most active kind of tenant,” said Nancy McClure, first vice president for CBRE in Tucson. “Restaurants bring in a lot of people and more bodies than department stores.”

The CBRE report said restaurants occupy only about 4.6 percent of mall space while the sales growth rate is higher than clothing stores.

McClure said some of the strategies investors use to fill the spaces and accommodate consumers include adding more restaurants, entertainment venues, hotels, multi-family living and office spaces.

This gives investors an opportunity to put in different options for people that aren’t typical of largely developed areas.

“It can be a real big opportunity, but the people that own the property need to have a lot of resources and know how to take something that has been retail and figure out how to get all the entitlements and approval to redevelop it into something different,” McClure said.

Bourn has adapted some of these strategies for the Foothills Mall. Stevens said they want to focus on not just retail, but other choices that will attract customers in the first place.

“Our goal is to start on the redevelopment as soon as possible and that’s why we’re out in the market talking to a number of prospective users to be able to get them committed and start on the physical redevelopment,” Stevens said.

Stevens said that the companies shutting down in malls have lost touch with consumers and what they are really looking for.

McClure also believes that many department stores have gotten away from what the consumer wants.

“It’s honestly not a surprise that we’re going to see some Kmart, Sears, and Macy’s go out of business, and who knows who else is going to close up soon,” she said.

Some retail stores are closing the physical store and going fully online.

Sita Bracamonte, former manager of the closed Bebe store at La Encantada, said that is just what they did.

“The store was struggling to keep up with the clientele. We had no choice but to sell online,” Bracamonte said.

Although some stores are closing, malls won’t be left completely without retail stores anytime soon. Many have caught on to the online shopping trend and have expanded their digital footprint to keep business at both ends.

Aracely Collins, a J.C. Penney employee at Tucson Mall, said she isn’t afraid for the store.

“Anything that comes from online hits the stores,” Collins said. “We’ve always been a strong online business. J.C. Penney has always been known for the J.C. Penney Catalog, so it wasn’t a huge transition for us.”

Sophie Manley is a reporter for Arizona Sonora News, a service from the School of Journalism with the University of Arizona. Contact her at sophiamanley@email.arizona.edu

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