Is the mall really

DEAD?

Since 2010, more than two dozen enclosed shopping malls have closed.

Source: Green Street Advisors

But why?

Some say demographics and changing shopping habits have led to the mall’s demise

Some say ECOMMERCE is to blame

REALITY IS THAT LESS THAN 10% OF GOODS ARE SOLD VIA ONLINE RETAILERS

Source: New York Times Jan 3, 2015

Online purchases

affect Big Box retailers more.

These stores are generally not in malls.

Malls are more affected by BEING overly saturated with too many of the same stores.

Conclusion?

A gluttonof retail

is one cause for mall failures.

A pie can only be sliced so much!

Or the mall simply failed to ADJUSTto the changing market

So what’s happening?How does one go….

FROM THIS To THIS>>>

Some malls have declined due to the consolidation of anchor tenants

IN 1990, ANCHORS LIKE RICH’S, BLOOMINGDALES, MARSHALL FIELDS, HUDSON'S, DAYTON'S AND MACY’S WOULD FIGHT OVER SPACE IN MALLS.

Some malls have declined due to the consolidation of anchor tenants

That’s not the case today.

Macy’s BOUGHT them all!

Bloomingdales

Marshall FieldsHudson's

Dayton's

Rich’s

?So what’s the bottom line

Not all MALLS are deadand NOT ALL malls are going away

Malls have never beenentirely about BUYING

The first mall in the US was not created by a merchant, but by a sociologist!

Victor Gruen understood the need to create a centralized community to battle the American suburb of cul-de-sacs, clubs and carpools.

Victor Gruen understood the need to create a centralized community to battle the American suburb of cul-de-sacs, clubs and carpools

People want to be with other people….

Gruen understood this basic need and he created a way for that to be possible…..20th century-style

People have been coming together to formally socialize since at least the

10th Century B.C..

The Census Bureau estimates there will be more than 88 million people over 65

in America by 2050, more than twicethe current figure.

That alone gives modern malls a core customer base.

another reason…

That’s a lot of mall walkers!

Just one more reason….

According to data released by the International Council of Shopping Centers,

occupancy rates increased, the highest since the throes of the recession,

in second-quarter 2008.

End of 2014,mall occupancy UPsales per sq ft UP

The BEST since 1987

Source: Retailing Today

This is worth repeating….End of 2014,

mall occupancy was 94.2% -The BEST since 1987

Source: Retailing Today

Like malls, there’s lots of office buildings….

Office Buildings

Occupancy rate

83.2%

Let’s compare Mall OCCUPANCYto office buildings –

end of 2014

Office occupancy

83.2%Mall occupancy

94.2%

Both are types of real estate

WE DON’T HEAR PEOPLE

SHOUTING THAT OFFICE BUILDINGS ARE DEAD!

Only 3.4% of all malls are considered “dead”

40% OR MORE VACANT(CONSIDERED DYING)

20% - 40% VACANT(CONSIDERED UNHEALTHY)

10% TO 20% VACANT(CONSIDERED A SIGN OF

TROUBLE)

20%

15%

10%

5%

0%

‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14

Source: New York Times Jan 3, 2015

CONSIDER THIS….

If 3.4% of all malls are dead,

96.6% ARE NOT!

80% OF THE 1,200 US MALLS ARE CONSIDERED TO BE HEALTHY.

Many malls have vacancies under 10%

Source: CoStar

People are spending & most mall rents are on the rise…..

As much as 17%

What about Net Operating Income?

2014 Mall NOI was the HIGHEST year over year growth in 14 years!

Sales to increase 5% Earnings to top 8%

Wall Street Predicts mall owners will see…

Some malls have seen their marketchange so quickly and drastically,

they will change

Or die a quick death….

Fledgling malls must reposition themselves to survive

Repositioning ofPhipps Plaza, Atlanta, GA

Others will have to refine

themselvesto meet the

changing market

“All malls can die without sensitivity to change “

-Gar Muse Principal, Retail Design

COOPER CARRY

repositionverb re·po·si·tion \ˌrē-pə-ˈzi-shən\

> to change the position of

> to revise the marketing strategy for (a product or a company) so as to increase sales

RE

It seems like much of the mall repositioning is taking place in dense urban environments

Take Landmark Mall near Washington, DCfor example

It seems like much of the mall repositioning is taking place in dense urban environments

Take Landmark Mall near Washington, DC for example

Landmark Mall is ADAPTING

It seems like much of the mall repositioning is taking place in dense urban environments

An empty food court CAN speak volumes

Built in 1965, the mall lost its luster and its owner suffered a financial crisis

Landmark Mall is ADAPTING

The mall is being repositioned by new owners to become more of an urban

mixed-use project.

Landmark Mall is ADAPTING

Some stores are demolished and apartments being added will increase local population.

The roof comes off.

Landmark Mall is ADAPTINGCirculation is improved by reshaping and reorganizing the vertical circulation and making the entire space more walkable and appealing.

Repositioning required cooperation from many stakeholders

• Department stores• Existing mall retail tenants• Office tenants• Government agencies• Mall owners

Landmark Mall is ADAPTING

It required a

VISIONwith solutions

So far what have we learned?

So far what have we learned?

Malls die when they don’t adapt

So far what have we learned?

Malls die when they don’t adapt Too much of the “same” retail hurts malls

Malls die when they don’t adapt Too much of the “same” retail hurts malls

Rents are on the increase

So far what have we learned?

Malls die when they don’t adapt Too much of the “same” retail hurts malls

Rents are on the increaseSales are on the increase

So far what have we learned?

Malls die when they don’t adapt Too much of the “same” retail hurts malls

Rents are on the increaseSales are on the increase

Mall NOI is on the increase

So far what have we learned?

There’s still one nagging question.

What about…

There, we’ve put it out there!

How do they shop?

Not in malls.Right?

Wrong!

Source: OpinionLab

Wrong!In a 2014 OpinionLab survey:

• 85% of Millennials plan to head to the mall at least once this summer

• 60% say they will go at least once a month• Nearly half (48%) of Millennials rank browsing

different stores as their #1 reason to go to the mall• Only 1 in 10 Millennials says nothing would

motivate them to spend more time in the mall

Source: OpinionLab

Biggest shockerMillennials are the only generation that prefer the mall to shopping online (37% to 27%)

Source: OpinionLab

For Retailers Appealing To Millennials

"It's less about commerce first more about engaging the consumer

Source: Aria Hughes, an editor for the online trend forecaster WSGN

&

“The mall that’s dead probably needed to be. “

-Angelo Carusi Principal, Retail Design

COOPER CARRY

Why.

“Because it did not (or would not) change to meet the needs of the consumer. For over 2,000 years people have sought venues in which to socially interact with others. Malls have, and always will, provide that forum and space. It’s innate in us, as human beings, to want to be around others. We have found in malls a way to socially interact while filling another basic need which is tending to the desires of the head, heart and stomach. What better way to do that than with a retail store, coffee shop or soothing water feature close by.”

-Angelo Carusi Principal, Retail Design COOPER CARRY

To sum it up . . . . .

“Almost from their beginning, malls told stories. Shoppers, municipalities, tenants and even developers contributed to the fabric which when woven together resulted in dynamic places and spaces that became places to not just shop, but to gather. Not much has changed in the essence of the mall. What has, and always will change, is the demographics, shopping preferences and retail itself. This requires that malls change as part of the evolutionary process. It doesn’t necessarily mean that all malls are dead. It does, however, mean that all malls can die. It’s the mall’s sensitivity to change combined with the will to do so that will live on.”

-Gar Muse Principal, Retail Design COOPER CARRY

Let’s start a conversation…

COOPER CARRY, 191 Peachtree Street NE, Suite 2400, Atlanta, GA, 30303, 404-237-2000

Angelo Carusi, AIA, LEED AP, CDP, CRXPrincipal –Retail Specialty Practice Group

angelocarrusi@coopercarry.com404-358-4815 - cell

Gar Muse, AIAPrincipal –Retail Specialty Practice Group

garmuse@coopercarry.com404-219-3895 - cell

Credit where credit is due:

• The Economics (and Nostalgia) of Dead Malls The New York Times, Jan. 3, 2015

• N. American REIT & Real Estate Research Reports, Green Street Advisors, 2015

• Victor Gruen and the Birth of the Shopping Mall, Labelscar, Aug. 22, 2012

•The De-Malling of America: What's Next for Hundreds of Outmoded Malls?,

CoStar, Oct. 3, 2012

•Opinion Lab: Fresh insight into millennials, malls & the future of the store,

March 30, 2014

•Retailing Today: Report: Malls not dead, far from it. March 30, 2015