Ultimate Resource On Bankrupt And About-To-Be Bankrupt Shopping Malls (#GotBitcoin)
Vacant storefronts don’t herald jolly holidays for professional Kriss Kringles; ‘I have a book for when it’s really, really slow’. Ultimate Resource On Bankrupt And About-To-Be Bankrupt Shopping Malls (#GotBitcoin)
Rick Moody says he arrives early for his shifts as Santa at the Auburn Mall, puts on his red suit, settles into his oversize chair in center court and starts “working the crowd.”
In a mall where Santa’s stage is ringed by vacant storefronts, sometimes there is no crowd. Luckily, there is no clause against reading when he doesn’t see much foot traffic.
“I have a book for when it’s really, really slow,” the 61-year-old mall Santa says, pointing to a Western paperback titled “Straight Outta Tombstone” tucked behind Christmassy coloring books he keeps in a red basket by his throne. And when children aren’t around, “you wave to the customer-service people,” he says of mall employees in a nearby booth.
’Tis the season when shopping malls bring in jolly, white-whiskered Santas to pose for photos with children. And the slump at many shopping malls means more downtime for Santa, and for the photographers and elves staffing the operations.
“The guys have basically become a decoration,” says Robert Turner, a working Kriss Kringle and board member of the International Brotherhood of Real Bearded Santas, a professional organization that now goes by the abbreviation IBRBS to be inclusive of Mrs. Claus.
One Santa Mr. Turner knows passed time in a slow Louisiana mall by bringing wood to carve. “He actually whittled.”
Many mall Santas are sledding off to more exciting venues, Mr. Turner says, from corporate events to house parties. “We, as a Christmas community, are trying to help these guys adapt,” he says.
Some malls, particularly new or recently renovated ones in great locations where incomes are high, still draw more than enough people to keep Santa booked.
Yet many older malls are sputtering in the face of changing consumer shopping habits and a glut of shopping centers. Mall vacancies rose to their highest level in seven years in the third quarter.
At Frontenac Mall, a 51-year-old Kingston, Ontario, shopping center grappling with vacancies, Santa has a ho-ho-hum schedule, according to Blaine Fudge, the mall’s property manager. “You could literally walk right in and see him,” he says.
Don’t feel sad for unbusy Santa, adds Mr. Fudge. “He’s got a nice reclining chair he sits on, and he can certainly walk around.”
The slower pace may appeal to new Santas still learning the reins and older ones with memories of long lines, says Ed Taylor, who runs the Santa Claus Conservatory, a Santa training school.
Mr. Taylor teaches students that mall Santas need to be careful not to appear bored when business is slow.
“We do training on the resting smile face,” he says. “You don’t want to be caught in any kind of thing that doesn’t feel upbeat and Santa-like.”
David Nelson, a professional Santa in Fontana, Calif., felt about as popular as fruitcake during a recent mall gig.
“Nobody would come see Santa,” says Mr. Nelson, who is 65. “Your mind starts going, why? Do I have something in my beard? You have to get yourself snapped out of that.”
Santas at slower malls also have to be prepared for kids who linger for long visits since no one else is waiting. Santa can run out of material.
“You have to learn time fillers,” Mr. Nelson says. “I have pictures of reindeer and a back story of each of them, so I can stretch the time.”
One Sunday earlier this month, the Santa in a giant chair in the center court of Silver City Galleria in Taunton, Mass., checked his smartphone during a lull. The mall lost Sears in November, Macy’s and Best Buy in 2017 and a J.C. Penney in 2015.
“There is not a lot of foot traffic,” said Bart Wortley, the 57-year-old Santa. He motioned to two people running the Santa photo operation.
‘It’s OK,” he said. “The elves that are here are funny, and we just entertain each other.”
Andrew Mellody brought his 10-year-old son there to avoid lines.
“We were in and out,” said Mr. Mellody, who is 47.
Jessica Barber, a loan officer, says a friend happened to spot and snap a photo of a lonely Santa near empty stores at the Chesterfield Mall in Missouri. Ms. Barber felt sorry for him and decided recently to start a social-media campaign. She also took her adult co-workers to get photos with the Santa.
“Look at this sweet Santa waiting for kids,” Ms. Barber, 41, wrote in a Facebook post shared nearly 3,000 times.
The social-media campaign and local publicity resulted in a line for Santa visits the following weekend, a mall spokeswoman says.
Chesterfield City Administrator Mike Geisel is glad to see Santa getting more attention. “They have an excellent Santa there at Chesterfield Mall,” he says. “He’s an underutilized asset.”
Sluggish Santas inspire pity in some shoppers. “Look! Santa is so lonely. Let’s go have our pictures taken!” Laura Liudahl, a 43-year-old baker In La Crosse, Wis., recalls telling her sons after seeing St. Nick sitting alone at a mall there. “What went through my mind is that, God, that dude has to be so hot and so bored.”
In Auburn, Maine, a small city about 40 miles north of Portland, the Santa business isn’t what it used to be, says David Lee, the manager of the Auburn Mall, which opened in 1979.
Still, Santa remains popular, he says, adding that visits pick up on weekends and closer to Christmas.
Dressed in his red furry suit with a “Ho Ho Ho” rug at his feet, Mr. Moody, the Santa, says the $20-an-hour gig is physically easier than his other job as a cashier, which requires constant standing.
He and the photographer sometimes each take a side of the stage and try to wave down potential customers.
On a recent Thursday evening, Mr. Moody was waving to workers over at a customer-free seasonal Hickory Farms operation. “Hey Santa, want a sample?” one shouted.
Around 6 p.m., Cindy Bray brought in her 4-year-old son for a photo. “This is awesome,” she said of having Santa to herself.
After the photo, the boy remained with Santa, clearly relishing his visit. “You can still talk to him,” Ms. Bray assured him. “There is nobody else here.”
Top-Tier Malls Are Latest Victim of Retail Headwinds
Some landlords warn of slowing income growth as they try to cope with changing consumer behavior.
For years, the prime malls with the best locations escaped much of the havoc being wrought in the retail world by internet competition.
But now, even they are beginning to feel the pain, setting off new alarm bells on Wall Street. Some of the landlords of the most highly trafficked malls are warning of slowing income growth as they try to come up with new ways to cope with changing consumer behavior and billions of dollars of sales shifting online.
For example, Simon Property Group, which owns King of Prussia mall in Pennsylvania and Phipps Plaza in Atlanta, Ga., lowered its 2019 guidance on net income to a range of $6.76 to $6.81 per share from its earlier estimate of $7.04 to $7.14. Simon executives said during the company’s third-quarter earnings call that a high number of retailer bankruptcies this year was partly to blame.
Taubman Centers Inc., which owns The Mall at Short Hills in New Jersey and Beverly Center in Los Angeles, also lowered its 2019 guidance for same property net operating income growth to zero to 1%, down from the previous 2% estimate. William Taubman, chief operating officer of the company, said the bad news was partly the result of the market overreacting to the Forever 21 Inc. bankruptcy.
“Forever 21’s bankruptcy has disproportionately impacted ‘A-malls’ and Taubman Centers specifically,” he said.
For years, many retail analysts considered roughly 260 top-tier malls to be mostly protected from store closings and bankruptcies that plagued their lower-tier peers in less affluent areas. These centers typically boast an attractive assortment of stores and restaurants, making them more appealing and relevant to customers.
But the recent bankruptcies of big-name retailers are beginning to fan further across the mall spectrum. Moreover, signs are growing that even when malls appear full, revenue growth is slowing because landlords have to cut rents to keep them there.
For example, Forever 21 has started closing 87 stores, such as its Riley Rose beauty store at Roosevelt Field in Garden City, New York. The teen retailer had earlier planned to close up to 178, but scaled that back after securing rent reductions from landlords, who in turn had to lower their earnings projections.
The average vacancy of the top malls continues to be in the respectably low 90% range. But some analysts are concerned about the higher costs landlords are facing to replace departing tenants.
Analysts also are starting to express skepticism about a major metric landlords tout: sales per square foot. Landlords typically calculate sales productivity against occupied space instead of total space. But that means stores can close without affecting the mall’s average.
Sometimes, a few highly-productive tenants can skew sales per square foot. For example, a Tesla store could raise a mall’s annual sales-per-square-foot number by hundreds of dollars.
“All it tells me is that you added a Tesla into your mall. It tells me nothing about how the mall is doing,” said Vince Tibone, an analyst at Green Street Advisors.
Investors in 2019 have punished the top mall owners, whose stocks typically outperform landlords of weaker shopping centers. This year, shares of Taubman and Macerich Co. have fallen by roughly a third, while Simon’s are down about 14%. The FTSE Nareit All Equity REITs Index gained 23% this year.
The stocks have fallen so far that some investors believe now is the time to buy. Dividend yields at Taubman and Macerich currently exceed a tempting 9% and 11% respectively.
Dividends Rise as Share Price FallsMall REITs’ dividend yields.
Bill Smead, chief executive of Smead Capital Management, said his firm recently started investing in Macerich partly because executives there have been buying their own firm’s shares. Stock purchases by executives are typically seen by investors as signaling confidence that more gains lie ahead.
But others voice caution. “They may not be as attractive as they look, especially since the dividends for some REITs are not fully covered and require cash flow growth,” Morgan Stanley Research analysts said in a note.
Simon, Taubman and other big landlords point out that they are investing heavily to come up with entertainment options and new retail strategies that combine online shopping with bricks and mortar retail. They are also spending hundreds of millions of dollars to redevelop a selection of malls, giving older ones a face-lift and adding residential, office or hotels nearby that could add value to the real estate.
“There’s a lot of redevelopment activity that is going to define the mall space,” said Ross Prindle, managing director at valuation advisory firm Duff & Phelps. “That doesn’t happen overnight.”
U.S. Malls, Well Past Their Heyday, Struggle To Survive
Like so many once-vibrant shopping centers, the challenges of Atlanta’s Greenbriar Mall are emblematic of the industry’s plight.
Between lockdowns, purchases shifting online and crowded spaces being avoided during Covid-19, America’s malls have taken a financial hit.
Greenbriar Mall in southwest Atlanta is among them. One of the country’s oldest malls, opened in 1965, is now operating without any anchor stores after its Macy’s recently closed. Still, the shopping center holds value and memories for the predominantly Black community it serves. Will that be enough to save it?
Lenders Cracking Down On Mall Owners Behind On The Mortgage
Saks at Miami mall, Midtown Manhattan retail property become foreclosure targets.
More lenders are starting to deliver a stern new message to delinquent mall owners: time to pay up.
During the early months of the pandemic, lenders were willing to allow rent deferrals and offer other concessions to retail property owners. Retail cash flow would return once the initial lockdown period passed, lenders figured. But the pandemic has accelerated store closures. In a big blow to dozens of malls, Lord & Taylor filed for bankruptcy in August and will close all 38 of its stores.
Now, as many landlords continue to struggle and miss payments, some banks and other lenders think it is time to start cracking down.
In one recent example, lenders to the Saks Fifth Avenue store at Miami’s Dadeland Mall are foreclosing on the property owner after it defaulted on its mortgage payment in April, and hasn’t paid since, according to court documents filed at a court in Miami-Dade County.
The $846 million mortgage is securitized with collateral from 10 Saks stores and 24 Lord & Taylor stores around the country, meaning the lender could seize these properties through the foreclosure process.
An entity affiliated with Hudson’s Bay Co., owner of the stores, said it has been in talks with the lender that began before the foreclosure proceedings.
The owner “is disappointed that in the context of a global health crisis the lenders would choose litigation over cooperation but understand the background and continue to diligently pursue an amicable solution,” a Hudson’s Bay spokeswoman said.
An attorney for the lender, who represents the various bondholders in the commercial mortgage-backed securities market that have the loan, didn’t respond to requests for comment.
Some lenders are now worried about fast-falling retail property valuations, which around the country are plunging by as much as 75%. Lenders say they are compelled to conduct foreclosure sales to recoup what is owed them.
Meanwhile, a number of mall owners are filing lawsuits against retailers that they say have the financial ability to meet their obligations but haven’t paid rent. Some tenants, in turn, have asked the courts to allow them to break their leases.
“Every step of the way, everyone is fighting each other to see who will take the loss,” Jim Costello, senior vice president of research firm Real Capital Analytics.
In New York City, a Canadian bank has launched foreclosure proceedings against a retail property in Midtown Manhattan owned by Harbor Group International. The property, whose former tenants include fashion and accessories retailer Charming Charlie, had a $40 million mortgage. The borrower has been in default of its debt payments since May, according to a court filing last month. Harbor Group didn’t respond to a request for comment.
Some mall landlords have given up. The owners of Park Plaza Mall in Little Rock, Ark., ended loan modification talks in the spring and turned the keys over to their lender. The mall was valued at $33.1 million when the negotiations collapsed, down from $142 million in 2011, according to real-estate data firm Trepp LLC.
A number of owners are looking at converting malls to residential buildings or warehouses, which are more in demand. But that could result in valuations on the redeveloped properties falling by 60% to 90% compared with pre-Covid-19 levels, according to research analysts at Barclays PLC. Only 15% of mall conversions to other mixed-use developers offered better recovery rates, the analysts said.
Some mall investors are also pressuring landlords to sell properties, opposing fundraising plans that they believe will only prolong the suffering.
A group of investors of Unibail-Rodamco-Westfield SE, which owns properties in Europe and big malls in San Diego and suburban New Jersey, said the company’s recently proposed 3.5 billion euro rights issue, equivalent to $4.1 billion, would be severely dilutive to its share price.
The investors said that the Paris-based company should sell its U.S. mall portfolio instead. URW’s acquisition of Westfield Corp. in 2018 had “disastrous consequences,” according to a presentation by the activist investors who jointly own 5% of URW.
The Westfield acquisition “burdened the company with debt, distracted management and was a gross misallocation of resources,” said Léon Bressler, a former chief executive officer of Unibail, the predecessor to URW. He is leading the group of activist investors.
Since December 2017 when Unibail-Rodamco SE said it would buy Westfield, its share price has fallen by more than 80%.
URW’s supervisory board said URW recently sold an office building in France and that its restructuring plans will boost the company’s operational and financial flexibility.
New Jersey’s American Dream Megamall Is Once Again Sinking In Debt
Since its groundbreaking nearly two decades ago, the megamall built in New Jersey’s Meadowlands has done little except hemorrhage cash. Now, less than two years after its much-delayed opening, the complex known as American Dream is threatening to dash the lofty ambitions of yet another developer.
The Ghermezian family, which runs some of the biggest and most successful malls in North America, can’t keep up with the bills on the shopping and entertainment megaplex, which helped drive its original developer to the brink of bankruptcy and later was seized by lenders from the team that came next.
Revenue from the stores has been so scarce amid the surging pandemic that the Ghermezians have hired legal and financial advisers to help them ease the crushing $3 billion debt load, and perhaps retain some role in running the project, according to people with knowledge of the matter.
The family members aren’t the only ones who stand to lose big money. Lenders including JPMorgan Chase & Co., Goldman Sachs Group Inc., Soros Fund Management and Starwood Property Trust Inc. could face losses on $1.7 billion in construction loans. About $1.1 billion of municipal debt is also backing the project.
“It’s been like watching a train wreck that goes on forever,” said Neil Shapiro, a New York real estate attorney and senior partner at Herrick Feinstein. “There aren’t a lot of projects that lose at least $3 billion that we’re still talking about as projects,” said Shapiro, who’s not involved with the mall.
Outwardly, the 3-million-square-foot shopping and entertainment complex on about 90 acres in New Jersey’s Meadowlands is almost fully opened, charging weekend crowds as much as $115 for day passes to the DreamWorks Water Park and $80 for its Big Snow indoor ski slope. Luxury stores including Hermès, Tiffany & Co. and Dolce & Gabbana are coming in September.
But it all may be too little, too late for the Ghermezians and their company, Triple Five Group. They’ve hired financial adviser Houlihan Lokey Inc. and the law firm of Weil Gotshal & Manges to represent them in restructuring talks, said the people, who asked not to be identified discussing the private negotiations. This month, American Dream dipped into reserves to make a $9.3 million municipal bond payment.
With the pandemic still making shoppers wary, sales at American Dream amounted to just $139 million in the first two quarters of the year, public disclosures show. At that pace, the mall is poised to fall far short of the nearly $2 billion that a 2017 study projected it would bring in during its first year of operations.
That’s jeopardizing the family’s hold on their $548 million equity stake. And they’ve already forfeited 49% stakes in two other megamalls — Mall of America outside Minneapolis and Canada’s West Edmonton Mall — that they pledged as collateral to American Dream’s lenders. Those holdings, valued at $680 million in bond documents, were seized back in March when the loans defaulted.
Representatives for American Dream and Triple Five declined to comment.
Given their experience with giant retail-and-entertainment complexes, one possible outcome would see the Ghermezians surrender ownership of American Dream while continuing to operate it, said some of the people with knowledge of the situation. After all, few others are qualified to run the behemoth enterprise, said Anjee Solanki, director of retail sales for Colliers, the real estate services company.
“It’s a beast of a project,” Solanki said.
A likely scenario is that the lenders grant another 18 to 24 months for sales to increase, if Triple Five kicks in hundreds of millions of dollars of its own cash or gets it from a new equity partner, according to Shapiro.
“There’s going to be at least one shot at letting the Ghermezians work it out,” he said, on the theory that “they’re going to do as well as anyone else.”
The saga began in 1993 when Mills Corp. was seeking to build a massive shopping, office and hotel complex on 200 acres of wetlands a few miles outside of Manhattan. Environmental opposition killed that effort. But Mills’ plans were revived a decade later when New Jersey green-lighted a proposal to redevelop another nearby piece of land — the vast parking lot surrounding what was then known as Continental Airlines Arena.
Mills, which called the project Xanadu, broke ground in 2004; two years later, it was teetering near bankruptcy.
Colony Capital Inc., led by Trump ally Tom Barrack, took control in 2007 and fared little better: lenders seized the property in 2010.
By the time Triple Five took over a year later, the unfinished project had already consumed $2 billion, bond documents show. The Ghermezians, who immigrated to Canada from Iran in 1960, came with their vision of a tourist hub that would lure 40 million visitors a year. Never mind that malls were steadily losing shoppers to online rivals, or that it would have to compete with Manhattan for tourists. Their plan featured a year-round ski slope and an indoor water park with slides, wave pools and tube rides. They added a trampoline park, go-karts and virtual reality entertainment.
“All the attractions are positioned to push traffic through retail, which is what we’re experts at doing,” American Dream President Don Ghermezian said in a July phone interview.
Financially, though, the Ghermezians need a different kind of expertise as they grapple with the mall’s layers of debt and powerful lenders.
The construction loans included $1.2 billion in senior debt and $475 million in mezzanine debt from lenders led by JPMorgan, according to a 2017 American Dream statement. Barry Sternlicht’s Starwood advanced $175 million of the 2017 senior construction financing. Other lenders included Goldman Sachs, CIM Group and iStar Inc., said people familiar with the matter.
At the top of the debt pile are municipal bonds that include about $800 million of so-called PILOT notes — backed by payments the developers make to bondholders in lieu of paying property taxes. Another $290 million of muni bonds are backed by a pledge of 75% of the sales tax receipts on mall purchases. Both were sold by JPMorgan and Goldman.
The PILOT and sales tax bonds are both senior to the construction loans, and the holders could foreclose on the property if the PILOT payments aren’t made, according to John Miller, the head of municipal investments at Nuveen, the biggest holder of American Dream muni bonds. That makes it likely the senior and mezzanine construction lenders would step in and make the payment to keep their holdings from being wiped out, said Miller, whose firm holds $685 million of the debt.
Discussions between Triple Five and its creditors could result in a forbearance or extension of terms to give the developer breathing room, said Miller, who’s not involved in the talks. “It’s in everybody’s best interest to keep those PILOTs current,” and find a way to solve the problem by fixing the mall’s operations, Miller said.
Whether that would work isn’t clear. Andy Graiser, co-president of the advisory firm A&G Real Estate Partners, doubts American Dream could compete as a tourist mecca with Manhattan just eight miles away. “You’re generally not coming to New York and having American Dream be in your top three or four things you want to do before you leave,” Graiser said.
The lenders and financial advisers either declined to comment or didn’t respond to messages. Starwood Chief Executive Officer Sternlicht is confident his company will come out whole. “We were the first mortgage lender alongside some of the nation’s largest money-center banks,” he said during an Aug. 5 earnings call. “I’m certain that our investment is sound.”
Despite the setbacks and Covid disruptions, the Ghermezians are getting tenants. About 100 retailers are open and more than 100 others are coming this year, according to Nuveen, which said in July that American Dream “appears to be gaining momentum.”
State Senate Majority Leader Loretta Weinberg, who has long expressed concerns about the public investment in the project, said the Ghermezians “seem to have done everything they can against all kinds of odds.” This included junking and replacing the exterior of Xanadu, which was widely ridiculed as an eyesore. The New Jersey Democrat had said it looked like something a 4-year-old made of Legos.
“It’s not nearly as assaulting on the eyes as the prior one,” Weinberg now says. “It’s a much better view from the turnpike.”
Dead Department Stores Reborn As Schools, Libraries, And Offices
Property owners and designers see cost savings and environmental benefits in adapting older buildings rather than tearing them down.
About 40% of U.S. department store outlets have closed over the past five years. Many of the large, boxy structures that house them, where prom dresses were purchased and perfume sampled, will be demolished. But some will be put to new uses.
Why repurpose department stores, the supposed white elephants of the retail world? Property owners and designers are becoming aware of the cost savings and environmental benefits of adapting older buildings rather than tearing them down.
Beyond that, many urban department stores have high-quality historic architecture, prime downtown locations, big lower-floor windows, and lots of open floor space. Suburban stores are often plain and windowless; inside, however, they have the same large floor plates, as well as key locations near highway interchanges. (No wonder some stores have been converted to temporary Covid testing and vaccination sites.)
“The big urban question of the 1980s and 1990s was what to do with former industrial areas of all of our major cities,” says Owen Hopkins, director of the Farrell Centre, a research hub for architecture and planning at Newcastle University in England. In the 2020s, he says, it’s “What can we do with post-retail spaces?”
In Texas, Austin Community College has spent more than a decade transforming the former Highland Mall into a mixed-use campus via a partnership with developer RedLeaf Properties LLC. The 50-year-old mall’s J.C. Penney reopened as academic space in 2014 after Barnes Gromatzky Kosarek Architects added a central skylight and glass portico. Design firms Gensler and Steinbomer, Bramwell & Vrazel Architects turned the mall’s former Dillard’s into the headquarters for KLRU, Austin’s PBS station, along with college broadcast facilities and offices.
The Stavros Niarchos Foundation Library (SNFL) on Manhattan’s Fifth Avenue, designed by Mecanoo and Beyer Blinder Belle, fits beautifully into a Second Empire building that opened in 1914 as the uptown branch of Arnold Constable & Co., the first department store chain in the U.S. The building’s clear layout and sweeping sightlines continue to be pluses, even after previous renovations. “If what you need is help with your résumé, you’re able to walk in and beeline to where you want to go,” says Elizabeth Leber, managing partner at Beyer Blinder Belle.
Last year, Amazon.com Inc. bought the former Lord & Taylor flagship store down the block from the SNFL, with plans to convert the 1914 landmark building into 630,000 square feet of office space for 2,000 employees. The company intends to add two floors and a rooftop terrace to the 11-story building, while restoring the facade and taking advantage of the store’s high ceilings and large, operable windows. Separately, the Wall Street Journal reported that Amazon is planning to roll out retail locations that will be smaller versions of department stores of old.
Lessons From The Rise And Fall Of The Pedestrian Mall
Car-free shopping streets swept many U.S. cities in the 1960s and ’70s, but few examples survived. Those that did could be models for today’s “open streets.”
One of the few bright spots of the pandemic was a renewed appreciation of the importance of outdoor public space for social interaction. In many cities around the world, popular streets were closed to vehicular traffic to create room for recreation and dining. Alternatively referred to as slow, open, shared or active streets, many of these pandemic-inspired closures were successful, and several cities opted to continue these street changes over the course of the summer.
But as summer ends and cities continue to reopen, local officials will need to decide whether to revert to the status quo or make the often-popular pedestrianized corridors permanent. It is a complicated choice. Advocates for shared streets can point to the many benefits for small businesses, social interaction and individual well-being. However, commuters may balk at detours as traffic picks back up.
Local officials can learn from an earlier generation of urban planners who faced a different sort of crisis. In the 1960s and ’70s, many U.S. cities began experimenting with closing off streets to traffic to stem the tide of urban decline and the fleeing of residents and businesses to the suburbs. In places as geographically diverse as Miami and Rochester and as different in size as New York City and St. Albans, West Virginia, the “pedestrian mall” swept North America (and beyond).
The trend was inspired by predecessors in European cities, but unlike their counterparts in Germany and Denmark, the American-style versions were seen as a means of revitalizing downtowns. The idea was to leverage the popularity of the suburban shopping mall by mimicking its layout and design; most offered ample parking, attractive features such as fountains, and a defined sense of enclosure.
Governmental support soon followed, in the form of tax law amendments, zoning ordinances and federal urban renewal funding. While the definition of what constitutes a pedestrian mall vary, estimates are that upwards of 200 were constructed during this time.
But by the 1980s and ’90s, it became clear that many of the first generation of American pedestrian malls were failing, dogged by high retail vacancy rates and thin crowds. Some were plagued by poor management and competition from their suburban counterparts; others succumbed to public perceptions about downtown safety. Fayetteville, North Carolina, for example, removed its pedestrian mall after seven years; in Ohio, Ashtabula’s mall lasted only four.
With colleagues at Cornell University, I analyzed 125 pedestrian malls from this earlier generation of vehicle-restricted street intervention to better understand why some are still with us. The average lifespan of a U.S. pedestrian mall was about two decades, we found in our study. Just 43 examples are still open.
So why did so many fail — and what qualities allowed this small subset to endure? We established four key findings.
Youth matters: We found that an increase in the median age of the city’s population by a year increased the risk of a pedestrian mall closure by about 8%.
The proximity to a university or college and a continuous supply of highly mobile residents paved the way for the long-term success of malls in places like Boulder (University of Colorado), Burlington (University of Vermont), Charlottesville (University of Virginia) and Ithaca, New York (Cornell University and Ithaca College).
Foot traffic is important: Just as the presence of a college provides a very localized source of pedestrian traffic, a destination within walking distance had a similar effect. A pedestrian mall close to a beach — such as Santa Monica’s Third Street Promenade, which opened in 1965 — was 77% more likely to survive than one that was not.
Similarly, proximity to a major tourist destination, such as Faneuil Hall Marketplace in Boston or Jackson Square in New Orleans, increased the chance of the pedestrian mall staying open by about 5%. Although malls did not generate their own foot traffic, they did thrive in areas where this traffic already existed.
Sprawl Kills: We found that there is a direct relationship between successful pedestrian malls and local population density.
Spread-out cities naturally have a harder time supporting pedestrian-oriented retail specifically, and economically vibrant downtowns more broadly, as they tend to be in greater competition with auto-oriented retail in suburban locations.
So low-density Galveston and Yuma eventually removed their pedestrian malls. As population density increased, the risk of pedestrian mall closure subsequently decreased. Denser cities are also able to better support public transportation which helps to produce foot traffic.
Bigger isn’t necessarily better: The length of a pedestrian mall is negatively correlated to lifespan, implying that longer malls suffered from a higher risk of closure and close sooner compared with shorter length malls. Research has shown that people are more likely to walk shorter, more variegated distances.
Long, monotonous streets are not conducive to encouraging foot traffic. The $17 million State Street Mall in Chicago, which was reopened to traffic in the mid-1990s, clocked in at more than 4,000 feet long and was critiqued for its size and sense of desolation.
The four characteristics that successful projects tended to share could inform the current discussion about today’s pandemic-inspired street closures. Overall, we found that there were a total of 125 different programs across 157 different local governments that have experimented with creating shared streets in response to the Covid-19 crisis.
Although many of these initiatives were designated to be temporary, advocates in several cities are looking to make them more permanent.
To do that successfully, city officials have several opportunities. Even if they can’t do much about factors like demographics, foot traffic and density in the short term, they can utilize design interventions to create more desirable pedestrian environments. These include creating a sense of enclosure and requiring the use of ground-floor windows to increase transparency.
Protection from the elements, via awnings or tree cover, also helps, as does providing a variety of seating options.
Planners can increase visual appeal by adding planters, vegetation, and unique paving materials like cobblestones. Programmed activities can create a more stimulating pedestrian experience. Coordinating and integrating adjacent land uses (retail in particular) can avoid physical isolation.
The pedestrian mall landscape is far different today than it was for cities in the 1970s. While pandemic-related fears of social gatherings and the decline of brick-and mortar-retail present new challenges, most U.S. cities today are no longer hemorrhaging residents to the suburbs, and a decades-long urban crime decline — notwithstanding a recent violence uptick some cities have seen — has helped ease the kinds of public safety fears that doomed so many of the first generation of pedestrian malls.
Many downtowns and central business districts now have more full-time residents than they did in decades past, a density boost that bodes well for this new wave of shared streets. Officials must weigh many factors as they bring their urban centers back to “normal,” but they should remember that, for many, normal means experiencing the city via a car-free public space.
Malls Bounce Back, But Brace For Tough Fall Season
Nicer weather got people out of the house, while newly vaccinated Americans felt better being around strangers in enclosed spaces, analysts say.
U.S. shopping malls have enjoyed a busy summer despite the spread of the Covid-19 Delta variant, providing a much-needed boost to retailers and property owners.
In July, mall foot traffic surpassed 2019 levels for the first time since the pandemic started, according to data analytics firm Placer.ai. Mall visits overall were up 0.7% from July 2019, led by trips to outdoor malls, which were up 2.1%.
Warm weather drew people out of their homes, while newly vaccinated Americans felt more comfortable being around strangers in enclosed spaces, analysts said.
“After a year and a half of staying inside there was a pent-up demand for doing something, and that something could have been just going to a mall,” said Sarah Helwig, an assistant vice president at Morningstar Credit Information and Analytics.
The increase in visits lifted retail sales, helping drive up the share prices of the country’s biggest publicly traded mall owners. Some, such as Macerich Co. and Simon Property Group Inc., are up more than 50% year-to-date, easily surpassing the S&P 500 index’s roughly 19% return for the year.
The rise in foot traffic is also good news for mall investors who in the early months of the pandemic feared a battering. Justin Kennedy, managing partner of the property lender and investor 3650 REIT, said his firm’s investments in mall-mortgage-backed securities fared better than he initially feared.
The company is now looking for more malls to invest in, he said.
Still, the sector faces fresh challenges in the months ahead. Colder weather often weighs on outdoor shopping centers, while the rise in Covid-19 infections could make more shoppers hesitant to visit indoor malls, analysts said.
Vacancy rates are still rising, reaching 13.7% over the past year for malls with securitized mortgages, according to Morningstar Credit Information and Analytics. And while retail mortgage delinquencies are down from their 2020 peak, according to Morningstar, they remain high compared with before the pandemic.
Brokers and analysts say that while some malls are doing well, many older malls are struggling, particularly those that lost department-store tenants. Visits to the King of Prussia mall in King of Prussia, Pa., for example, were down only 3.4% in the second quarter compared with two years earlier, but visits to the Destiny USA mall in Syracuse, N.Y., were down 17.6%, according to Placer.ai.
Destiny USA, which opened in 1990, lost its JCPenney and Lord & Taylor stores last year, and just 59% of its retail space was occupied at the end of 2020, according to Trepp LLC. Urban malls that depend on tourists and office workers are also seeing fewer visitors, brokers and analysts say.
Despite rising foot traffic, few clothing retailers are signing leases, citing uncertainty over the course of the pandemic, said Corey Bialow, chief executive of Bialow Real Estate LLC, a brokerage firm that represents retail tenants. “Everyone’s pretty much in a holding pattern and waiting to see when this is going to end,” he said.
Mr. Bialow said more malls were considering tenants like trampoline parks or rock-climbing gyms that they would have rejected in prior years.
“A trampoline park was not the most desirable tenant to bring to a mall a decade ago,” he said. “Now there’s not a lot of people taking 30,000 to 50,000 square-foot spaces anywhere in the country.”
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