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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe future of malls looks quite bright despite the rise of online shopping.
Indianapolis-based Simon Property Group Inc., the world’s largest shopping mall owner, certainly thinks so. It plans to build an outlet mall on 50 acres of high-profile land it has agreed to acquire in Whitestown’s sprawling Anson development, retail brokers familiar with the deal say.
Additional information likely will be available when the pre-sale “due diligence” process is completed in the next few months.
In the meantime, Simon can find encouragement from its research showing malls remain a major destination, particularly among millennials. It said in November that 89 percent of respondents ages 18 to 33 say they plan to shop at a mall this holiday season, despite their tech-savvy ways, compared with 83 percent of respondents of all ages.
That bodes well for Simon, whose tenants compete with Internet retail giant Amazon and, increasingly, retailers such as Target and Walmart that are doubling down on Internet sales by offering free shipping through Christmas.
“Despite experts telling everybody that malls are dead, they’re very much alive,” said Richard Feinberg, a Purdue University professor of consumer sciences and retailing. “Malls are still a destination place, and that’s what malls have that the Internet doesn’t.”
The town of Plainfield thinks so much of Metropolis that it’s preparing to help the new owner make $9.4 million in improvements to the mall.
Affiliates of Poag Shopping Centers LLC in Memphis, Tennessee, and Blue Vista Capital Management LLC in Chicago, the mall’s owner, are asking the town for nearly half the amount—$4.5 million—to help with the renovation that likely will include a name change.
That Plainfield is even considering providing millions of dollars to help renovate a shopping center a mere 10 years old illustrates how valuable malls still can be.
At no time is the value of malls more evident than when scores of consumers flock to them to check off their holiday shopping lists.
“The mall is an incredible asset for Plainfield,” town spokesman Tony Perona said of Metropolis. “We’re excited that Poag bought the mall, and we’re looking forward to working with them and what they can bring to the mall.”
Officials on Nov. 10 took the first step to provide the assistance, in the form of tax increment financing funds, by approving a “term sheet” laying out details of the deal the council would need to approve.
Malls still drive sales
Online holiday sales this year are forecast to grow 8 percent to 11 percent, outpacing the 3.1-percent increase for total holiday sales projected by the National Retail Federation.
Simon, however, is undaunted by the surge in online shopping. Without offering specifics, CEO David Simon told analysts in an October conference call that the company plans to ensure its properties remain attractive to consumers, no matter their age.
“We are going to experiment and do lots of things oriented around [millennials] to continue to make them an important consumer base in our properties,” Simon said. “But we’re not going to ignore the baby boomers, either, because they have a lot to spend.”
Another CEO, Glenn Lyon of The Finish Line Inc., echoed Simon’s sentiments, telling analysts in a September conference call that the athletic apparel retail chain is exploring ways to improve its store presentations.
“We can’t let the mall, which is still 85 percent of our business, not perform,” Lyon said. “The digital thing is a growth opportunity for all retailers, no question about it. But we’ve got to take care of our stores, improve the stores physically, and improve our assortments all the time.”
Each of Simon Property Group’s five local malls was about 95 percent occupied at the end of 2013, the company reported in a regulatory filing. As of Sept. 30, total portfolio occupancy stood at a healthy 96.9 percent, up from 95.5 percent last year.
Activity at two outlets that opened this summer exemplifies the retail sector’s rebound coming out of the Great Recession, which began in December 2007 and lasted to June 2009.
Simon owns a 50-percent stake in Charlotte Premium Outlets and a 35-percent interest in Twin Cities Premium Outlets in St. Paul, Minnesota. Both of the 100-store centers opened fully leased.
Locally, the company operates Circle Centre mall downtown, the Fashion Mall at Keystone at the Crossing, Castleton Square Mall, Greenwood Park Mall and Hamilton Town Center in Noblesville.
In June, Simon spinoff Washington Prime Group announced that it purchased its partner’s 50-percent share in Clay Terrace, the upscale Carmel retail center, for $22.9 million and assumed $57.5 million in debt.
The partner was Bob Lauth, CEO of Lauth Property Group, which co-developed Clay Terrace with Simon. The lifestyle center opened in 2004 and is nearly 98-percent occupied.
So what makes malls attractive to shoppers, and particularly to millennials? It’s all about the social experience, said Daniel H. McQuiston, an associate professor of marketing at Butler University.
“That was something that they kind of grew up doing,” McQuiston said. “It’s much more of a social thing.”
Added Feinberg: “You can’t get a latte online.”•
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