A couple of very interesting developments over the last few weeks may
significantly shake up the retail mall industry in the United States. The first
of these is the hostile bid by Simons Property Group of Indianapolis, Indiana
to take over The Macerich Company of Santa Monica, California. Between them
they own and operate over 425 malls and retail centers in the United States and
foreign countries. (Macerich – 95 properties and Simons – 325+ properties, source Wikipedia). I would venture to
guess that 90% of Americans are less than one hour away from one of their
respective centers. The second and even more fascinating is that the Edmonton,
Alberta based Triple Five Group that owns the Edmonton Mall and the Mall of
America is proposing a 4 billion dollar super, humongous, enormous, colossal
entertainment and retail “mall” near Miami.
I
have been directly involved in one form or another in the mall design business
since the days of Alfred Taubman in the 1970s. Then some of the most exciting
changes to the retail industry were underway. And many of these changes wrought
terrible things on towns, peripheral suburban communities, and even downtown
traditional retail centers. This is not the place to get into the history of
malls in America (and elsewhere), but it is the place to look at how the forces
of the marketplace consumer seem to be one step ahead of the retailers and mall
owners. We went from small town America, to mid-sized suburban shopping
centers, to enclosed weatherproof malls and super-malls, to massive retail
centers with a mix of enclosed and open pedestrian areas, to remodeling the
traditional downtown, to massive failures due to high debt by some of the
largest mall owners (example: General Growth Properties), and now to the restructuring
of both the mall concept itself and the companies themselves.
The
biggest change seems to be in the venues themselves. Most enclosed malls were
isolated at their start, primarily due to location (freeways) and cheap land
costs. These were the 70s and 80s, now these malls are surrounded by
residential development as well as ancillary retail and office complexes. Some
have even sparked “new towns” around them. These malls are redeveloping to now include
housing and office uses.
Some
are beginning to emulate the entertainment aspects of some of the larger malls.
While questionable, if there are enough customers many things are possible.
Why
would Simons want Macerich, I have my own ideas? Simons has been very
aggressive in trying to increase its square footage. Five years ago during
General Growth’s serious financial problems, Simons tried unsuccessfully to
take over the company, eventually they walked away. Simon has properties in
Europe and Canada and have aggressively expanded into the premium outlet
market. Macerich, while having some outstanding properties (Santa Monica and
Walnut Creek, California), is also a developer/owner of mid-sized sub-regional
centers across the United States. These properties would complement Simon’s
collection. Whether Macerich can fight off Simon as well as General Growth did
remains to be seen. The concern is that the customer will suffer if these
acquisitions go forward is of little concern. The customer is, and has, shown
itself to be fickle and will go where there is the best value, venue, and
variety to shop. Failure to provide this is not an option. My guess, it is the
long-term leases of many of the high-end retailers located within the Macerich
centers (Nordstrom, Niemen Marcus, etc.). GO HERE
But,
Triple Five’s direction is totally different. GO HERE To
used an over-worn phrase, the are trying to Disneyfy the retail experience. Their
new Miami complex will include a ski slope, a water park, a sea-lion show (not
in favor of these myself), miniature golf, bowling, as well as everything from
the usual restaurants, hotels, and condominiums. There is even a rumor there will
be retail stores and shops. Wow and double wow, the fun and games of the retail
giants of Minnesota and Edmonton Central Plains of North America are coming to
South Beach. Many of these enticements have been tried before, especially
during the late seventies with circus type retail malls and themed venues
(skating, park-like spaces, and roller coasters). Most failed or were junked.
I
have also found that these centers can never create a new market. They can only
steal customers from other markets; this is what caused many of the suburban
problems in the 1980s when the enclosed mall did so much damage to the
traditional downtowns of smaller communities. These things are very expensive,
I will wait to see if they can find the funding.
And
lastly the big can get bigger. It was announced that the “new” General Growth (after
its literal resurrection for the dead three years ago), is expanding its
flagship mall in Honolulu. GO HERE Its
Ala Moana Center (the world’s largest open-air mall) is expanding by another
660,000 square feet. They also sold a significant interest in the mall to an
Australian retirement fund, AustralianSuper. While Ala Moana is not performing
to industry standards, GGP is obviously seeing a different future than what
many analysts’ see. The world is flooded with money at the moment trying to
find a home; many are betting that the American REIT industry is one of the
best places to be. I wish them luck.
Stay Tuned . . . .
. . . .
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