The growing number of store closures in 2019 is pushing mall vacancies higher than they’ve been in eight years, but area malls see opportunity amid the shut downs.
In the fifteenth week of the year, 5,994 stores in the United States have been set to close, surpassing the 5,864 closed in all of 2018.
Among the biggest contributors are Payless ShoeSource, which is closing 2,100 stores nationwide, Gymboree’s 750 closures and Charlotte Russe’s 500 shut downs, according to Coresight Research.
The diminishing presences of these retailers commonly found in malls has caused vacancy rates at shopping centers to jump to 9.3 percent, the highest since 2011, according to Reis, a commercial real estate data analysis firm.
Local malls have lost several stores in recent months including Maurices, Charlotte Russe, Old Navy, Payless ShoeSource and Crazy 8 at the Dayton Mall, along with Charlotte Russe, Crazy 8, Jeggings Park, Locker Room by Lids, Treasure Trove, Jos, Go Calendar and Trendzy at the Mall at Fairfield Commons, both owned by Washington Prime Group.
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“While the number of national tenant closings during the past 12 months has been significant, it certainly does not spell the end for the industry or the Dayton Mall,” said Dave Duebber, general manager of the Dayton Mall. “This is an exciting time for shopping centers, in particular the Dayton Mall, as we reinvent the retail experience by adding new uses over time.”
Enclosed malls have been working in recent years to model popular town centers that include a mix of tenant type such as retail, dining, fitness, office, hotel, entertainment, off-price and home furnishing.
Despite several store closings, area malls have secured new tenants across several industries. Ross Dress for Less will soon fill a years-long vacant hh gregg store at the Dayton Mall and furniture store The Room Place is constructing its store across several former in-line tenants that have closed, including Payless and Old Navy.
The Mall at Fairfield Commons will open its first large-scale entertainment concept Round1 on the bottom floor of a vacant Sears later this year. The top floor will add The Room Place and other stores are expected to open soon including locally-founded Rose & Remington, Sola Salon and the Primitive Shop, said general manager Leanne Rubosky.
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The malls both also recently added a family game center called The Yard and are focusing attention on events and expos that draw shoppers.
“In general the A malls are probably in pretty good shape going forward, where you have sales that are strong, where you have a tenant mix that is really strong, and where you’ve got retailers that are unique to the market,” said Scott Saddlemire or OnSite Retail Group, a firm that connects retailers with real estate. “It’s the B malls that are kind of teetering. The C and D malls, it’s just a matter of time before they go away or get totally redeveloped.”
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Malls can be classified in different ways, but generally class A mall have sales per square foot north of $500, followed by class B between $300 and $500 and Class C at less than $300, according to Motley Fool, an investor’s website.
Washington Prime has declined to give details about sales or vacancy rates for individual malls, but the company’s 2018 annual report shows that its core enclosed malls, which include Fairfield Commons and Dayton, had average sales per square foot of $399 and occupancy was 94.2 percent, placing the total portfolio in the class B range.
Duebber said the company has seen strong demand for space at the Dayton Mall and leaders are “very pleased” with the numbers.
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But vacant spaces can cause major concern for malls that can’t quickly turnover the space to a new tenant, Saddlemire said. Department stores that usually aren’t included in vacancy calculations don’t make malls a lot of money. Most of the time, the leases cover only the operating expenses with the expectation that the anchor tenant will draw in shoppers.
Smaller tenants have struggled as anchors fall further from public appeal. At one time, Sears got all the prime real estate at cheap costs because the stores drove so much traffic to malls, which has reversed in recent years.
Many of the mall tenants also haven’t adjusted as well to changing consumer habits that prefer online shopping and outdoor malls or standalone stores, he said.
The country is also likely over retailed, and the current store purge is partly a correction, Saddlemire said. In the early 2000s, capital was so cheap that nearly everybody who could was building. Now in 2019, there are too many stores and too much real estate.
But even during the construction boom, the Miami Valley was relatively conservative in its building, he said.
“There is concern, but it’s tempered, and we’re not chickens screaming the sky is falling,” he said.
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By the numbers
5,846: Stores closed in U.S. this year
9.3: Percent of storefronts are empty in malls
94.2: Overall occupancy of Washington Prime’s Tier 1 malls
13: Local mall stores closed in last five months