Malls aren't dying, they're changing — even in Hampton Roads. Here's how.
For two decades, MacArthur Center mall in downtown Norfolk seemed relatively immune to a growing shopping doomsday. While other malls in the area watched anchors like Macy’s, Sears or JCPenney leave, it still had Dillard’s and, a rarity, the famously exclusive Nordstrom.
But, almost all at once, it is losing Nordstrom April 5 after an exodus of smaller retailers – some to Town Center and others to company-wide closure. With a sprawling three-story space empty at MacArthur Center mall, will the shopping hub in downtown Norfolk be half-empty or half-full? That depends on what direction its owners – Starwood Capital and the city of Norfolk — take it. But if it wants to stay relevant, the direction that countless other malls are taking is to be nimble, be creative and—most of all—be vigilant about making shopping more of an experience.
That could mean anything from a yoga studio inside a yoga apparel store, theme-park-like attractions built around brands, havens for gamers and digital mirrors that add virtual lipstick, rouge and eyeshadow to reflections without needing to wand anything onto one’s own face. Even Nordstrom is experimenting with smaller stores where shoppers can get a manicure while choosing styles from a tablet computer, letting a stylist pick out items.
In Hampton Roads, malls are hosting hundreds of events, making plans to build up rather than out and, in at least one case, looking at their shopping center as a blank slate in order to attract shoppers.
“We’re doing things we wouldn’t have done years ago,” said Les Morris, director of public relations for Simon Property Group, the nation’s largest mall operator and owner of the Norfolk Premium Outlets.
In Atlanta, the company is adding a boutique hotel, a 90,000-square-foot luxury athletic club and a 13-story office building to Phipps Plaza. The company has also partnered with NHL Seattle to put its team headquarters and training center at the Northgate Mall in Washington. In Texas, it’s adding 433 luxury apartments and townhomes to the Round Rock Premium Outlets. And at its Las Vegas outlet mall it is testing package delivery to hotel rooms.
The company formed an “asset intensification” department a few years ago to handle adding non-retail uses to properties, whether in emptied department stores or stand-alone spaces.
“We’re spending over a billion dollars a year on redevelopment throughout our portfolio and we’ve done that consistently for the last six years,” Morris said.
What other malls are doing
In 30-plus years working in mall development, Jim Agliata had seen a lot, but “I’ve never seen it changing faster than it is now,” he said. The senior vice president of regional development for mall-owner Unibail-Rodamco-Westfield said flagship malls will survive, but only by re-inventing themselves. When Lord & Taylor left a hefty open-space at the Westfield Annapolis mall in Maryland, for example, his company began looking at medical uses. Elsewhere in the mall is a Playseum children’s attraction, a library branch and a PLAYlive Nation location that’s a gathering spot for gamers (both video game and board game players).
Duncan Wood started PLAYlive about a decade ago and it’s since grown to about 50 locations, mostly in malls. He doesn’t like comparisons to the mall arcades of yore, though.
“An arcade is a lonely place,” he said. His venues are more about bringing groups of people together.
“Human interaction, there’s nothing that’s more important. The more we can get of that, the better.”
He looks for foot traffic, number of vacancies, where the mall wants to be in the next few years and how far they have progressed toward that goal.
Westfield started to look at “experiences” to fill spaces inside its malls as early as 2007 when the recession began to take hold. Agliata said they brought in movie theaters, Lucky Strike Bowling, even Costco to a few of the malls he oversees from Long Island to Florida. Now there are aquariums, virtual reality and trampoline park experiences.
At three malls, and coming soon to a fourth, crayon-maker Crayola has been moving into large empty spaces since 2015 to build the Crayola Experience, where tour-goers can name and wrap their own custom crayon, star in a coloring book page and watch crayons be made the same way they would in the company’s Pennsylvania factory.
In Orlando, that concept took over the empty Nordstrom space.
“They moved out and we moved in,” said Victoria Lozano, senior vice president and general manager for Crayola Attractions & Retail.
Much like a Disneyland ride, the end of the Crayola tour opens into the mall concourse, designed to keep shoppers browsing.
“There’s more excitement with malls, now more than ever,” said Joseph Scaretta of CS Hudson in New York which helps create pop-up experiences for attention-getting brands. He will be talking about, “Creating Unique Experiences” at the upcoming International Council of Shopping Centers conference.
Before, “you had all this prime real estate that was almost untouchable,” he said. Malls had lengthy leases with anchors and tenants and when a space opened up, landlords often required extensive business experience and deposits on a lease. Now, they’re experimenting with leasing to digital-only brands or entrepreneurs. Scaretta said malls are also dividing large spaces to create a marketplace with rotating sellers. Bigger malls have also been using dead space to welcome touring “experiential” shows like Candytopia, where tickets start at $28 for adults to tour an Instagram-able, candy-designed wonderland.
Malls and retailers are also using technology to gather data on shoppers’ habits and interests.
San Jose-based RetailNext, an analytics firm that uses artificial intelligence to track shoppers — the path they walk, time spent shopping, whether they buy anything -- says it works with more than 400 brands in over 80 countries to help brick-and-mortar stores stay relevant.
Using artificial intelligence through its Aurora device, the company is able use Wi-Fi, Bluetooth, cameras, and sensors to track shoppers throughout a store. If a customer is part of a loyalty program, data can also be gathered about a shopper’s purchases.
MacArthur pop-ups, Pembroke build up, Chesapeake start-up
Even before Nordstrom’s departure was officially announced, MacArthur, like other malls, was already thinking outside its traditional shopping box to attract visitors at a time when seemingly anything can be bought online and delivered. For one, it filled vacant space with a fitness studio, sports-watching lounge and game room with ping pong, shuffleboard and an interactive video game.
Banana Republic’s former 4,000-square-foot space will be converted into a pop-up location for local hand-crafted handbag maker Hamilton Perkins Collection for four months starting May 1. The mall’s marketing director, Karen Husselbee, said shoppers can expect to see more local retailers and pop-ups in the future.
General manager Jim Wofford said foot traffic hasn’t fallen off, despite the vacancies.
“We look at foot traffic as any event, any experience, any type of activity that we produce that will make you come to our building. That’s traffic,” he said. “So then it’s up to individual retailers to get you to cross over that threshold into that store. Our job is to create the venue for you to want to go someplace.”
The mall’s Live 360 program has brought a seasonal ice-skating rink, fitness and cooking classes and community events to the list of offerings, as well as a pop-up contest for local small businesses to receive free space and utilities in the mall for a few months. Husselbee said the mall hosted nearly 400 events in almost two years.
If any mall is a blank slate of opportunity in Hampton Roads, it might be Chesapeake Square mall which sits on 68 acres and has lost two anchors – Macy’s and Sears – and a whole host of smaller tenants, making some of its corridors lengthy halls of vacancies. For now, its new owner, Kotarides Properties of Virginia Beach, is intensely focused on improving one end of the mall that faces a stand-alone movie theater it doesn’t own. As it is, there’s nothing for theater-goers to wander to or from at the mall before or after seeing a film. The mall’s new owner hopes dining and entertainment will draw them in.
One thing is certain: There is more than 600,000 square feet of total mall space at Chesapeake Square mall and it won't only be shops filling the void. There will most assuredly be office workers, too – something malls like Norfolk’s Military Circle have opted for, with large businesses building their offices and headquarters in empty mall space.
Kotarides has “heard clearly from the community and city officials that Chesapeake Square needs to be a focal point for daytime employment and we are being creative as to how to make that happen,” said David Machupa with Thalhimer who is handling the mall’s leasing.
Ramsay Smith, president and principal broker with Pembroke Commercial Realty, is familiar with the time it takes to draw in potential tenants and said spaces at Pembroke Mall haven’t remained vacant for a lack of effort.
He said he has worked for years on deals with retailers, including bowling alleys and Homegoods, just for them to fall through because business terms couldn’t be settled. Pembroke's draw is its anchors and higher-end retailers, including Target, Kohl’s, REI and Nordstrom Rack.
It took seven years to seal a deal with Target, which included selling nine acres to the retailer. Now, Smith is focused on indoor renovations to convert smaller spaces into larger “junior” anchor stores at the family-owned mall and, eventually, add height with additions that could stack up to 15 stories tall. “I think you’ll see higher-rise development at the mall.”
He said shoppers shouldn’t expect to see any changes for at least a year since any major renovations require approval from the mall’s other major owners. That includes Target, which owns its store footprint, and Seritage Growth Properties, which owns the REI, Nordstrom Rack, DSW, Fresh Market, BB&T and Smokey Bones spaces.
At MacArthur, Wofford said the mall is 98 percent leased, not counting the soon-to-be vacant Nordstrom space. The city has asked for Starwood’s input on potential uses for the space but Wofford declined to say what has been discussed.
Even with Nordstrom’s pending exit, Starwood still has development plans to add residences, a hotel and more retail in a public square next to the existing building. Plans don’t seem to have progressed since they were announced at a Norfolk State of the City address in March 2018, though.
“We’re still having conversations and we feel very confident that hopefully in the very near future, we’ll have something positive to announce,” Wofford said.