New Life Under Old Roofs? Enclosed Shopping Malls Battle For Sales With 'Lifestyle Centers'
PHOTO/emily micucci
After buying The Mall at Whitney Field in Leominster, Vintage Real Estate signed on a new anchor tenant, Burlington Coat Factory.
Though the Mall at Whitney Field has struggled in recent years, losing key anchor tenants and falling into foreclosure in 2010, Vintage Real Estate Chairman Fred Sands doesn't view his company's recent purchase of the Leominster mall as a risky venture.
According to Sands, it's still viable. The single-story shopping destination for North Central Massachusetts, located just off Route 2, opened in 1967 as the Searstown Mall. It was remodeled in 2001, but since lost anchor tenants like Circuit City and Ultimate Electronics. Sand contends that the large mortgage balance, $72.2 million when Vintage purchased it this spring, has been the major hindrance.
"That was more the problem, rather than anything to do with the mall," said Sands, who declined to reveal what Vintage paid for the property.
More Leases May Be Coming
Early last month, around the same time that news of the purchase broke, Vintage announced a lease agreement with a new anchor tenant. Burlington Coat Factory will fill the 66,000 square-foot space once occupied by Circuit City, with plans to open in 2014. Other new lease deals are in the works but have yet to be finalized, according to Sands.
It's the first Massachusetts venture for Vintage Real Estate and it comes at a time when many enclosed malls are struggling to compete with lifestyle centers like Northborough Crossing and Foxborough's Patriot Place.
Vacancies Up
According to Reis Inc., a market research firm that publishes commercial real estate data, vacancy rates at enclosed malls have climbed steadily over the last 13 years. In the first quarter of 2000, the nationwide vacancy rate was 5.3 percent, compared to 8.3 percent for the first quarter of 2013. Vacancies for enclosed malls were higher in 2010 and 2011, hovering at around 9 percent, but whether they’ll rebound to levels seen in 2000 is questionable.
A major factor, according to Jon B. Hurst, president of the Retailers Association of Massachusetts, is that many enclosed malls are tired and worn, and shoppers are attracted to newer lifestyle center with convenient parking close to destination stores.
“Unless you have some new investment and new excitement, it’s hard to attract a certain type of both tenant and shopper,” Hurst said.
The Mall at Whitney Field, for instance, will get a facelift. Sands said Vintage will lighten and brighten the mall, install better lighting and perform other updates. But he said there are no plans for demolition or expansion.
Sands is skeptical of the notion that today’s shopper prefers a lifestyle center, especially in New England, where the weather is cold more often than not. In fact, he said Vintage is interested in purchasing more Massachusetts malls, though he did not name any specifically.
“Especially when it’s snowing or raining outside, you don’t want to be walking around a lifestyle center,” Sands said. “You want to be in an enclosed mall.”
Sands’ attitude is not unfounded, according to Hurst. Though developers today are building new lifestyle centers rather than enclosed malls, major revamping of existing Massachusetts malls, like the Natick and Holyoke malls, and those owned by Indiana-based Simon Property Group, which include Burlington, North Shore and South Shore, have kept the crowds coming.
“You have to keep it fresh in order to keep the shoppers, particularly younger shoppers, interested,” Hurst said.
Another Simon-owned mall, the Greendale Mall in Worcester, has struggled with vacancy in recent years but as for renovation prospects, Les Morris, a Simon spokesman, said “there is nothing to announce at this point.”
Competition between enclosed malls and lifestyle centers has opened the doors for a new type of tenant, according to Hurst: the small business. Historically, smaller names and local businesses were rare inside major malls, but some have been able to find space at affordable rates as lifestyle centers have lured some larger retailers away.
This is true at Natick Mall, which counts local businesses among its tenants, including an artist, an art dealer, and a children’s boutique. And the Greendale Mall announced this past winter it would open doors for local business to help fill vacant stores, though so far, there are no new leases to announce, according to Ken Brown, area mall manager at the Greendale Mall and Marlborough’s Solomon Pond Mall, which Simon also owns.
According to Brown, there is no space available at Solomon Pond, or in the Auburn Mall, another Simon property, so a similar call to local businesses has not been issued for those malls.
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