Shoppers walking through Westfield Garden State Plaza Mall in Paramus, N.J.
Emile Wamsteker | Bloomberg | Getty Images
One of the most valuable centers in America is going to get a total person, further signaling how brick-and-mortar retail is evolving to include places to work, exercise and even live – not just buy clothes.
Unibail-Rodamco-Westfield's Garden State Plaza Mall in Paramus, New Jersey – Considered to be one of the top 10 shopping malls in the US based on sales – is being refurbished to include office space, residential area, more dining options, space for gym operators and yoga studios, hotel and open green space for the surrounding community.
This shopping mall visits more than 200 million visitors a year and is considered one of the more productive assets in the portfolio of 92 Unibail-Rodamco-Westfield resorts, over a dozen countries today. Real estate investments are also owned by Westfield Century City in Los Angeles and the Westfield World Trade Center in New York. Unibail-Rodamco, Europe's largest commercial landlord, bought the Westfield Mall owner last year.
"What people are asking for from the mall is much more than" four years ago, said Unibail-Rodamco-Westield president Jean-Marie Tritant. "People want comfort … so they can meet."
American shopping centers tend to be "much more closed" and "a bit like bunkers," he added. "Now we have to connect them with the local environment."
Shop owners across the country realize that consumer preferences are changing. More people are turning to the internet to buy clothes and furniture. And when they go to the store, they want to experience unique experiences and good food. This is how retailers left and right close hundreds of stores, large and small, forcing store owners to be creative with empty spaces or risk their properties becoming irrelevant. In 2019, more than 6,000 stores have closed out stores in the US that outnumbered 2018 in 2018. It is estimated that there will be about 1100 in America, which is probably too much.
"Hundreds of foreclosure trades – especially big department stores – are accelerating the transformation of centers and forcing landlords to rent an unusually large portion of their centers," said Daniel Busch, a commercial real estate analyst at Green Street Advisors. "The center's ability to attract good tenants is being tested more than ever."
Green Street estimates that nearly 800 free anchorage spaces are currently in US shopping centers.
Rendering what Garden State Plaza will look like after Unibail-Rodamco-Westfield rebuilds.
As part of the ongoing renovation at Garden State Plaza, former J.C. Penney store in the mall and Best Buy stores on the property are gutted for new uses.
Unibail-Rodamco-Westfield said this year that he will begin rebuilding the interior of the center to add more chef-backed restaurants, entertainment for families and health-and-wellness tenants. Revealing a new residential area, office building, hotel, public park and open green space will come in 2022.
"When you bring more food and entertainment … what happens is that you increase your rest time" by shoppers in the shopping center, said Tritant. "Dwell time is much higher … and as a result people spend more."
Garden State Plaza is anchored in the chain of stores of Nordstrom, Neiman Marcus, Macy and Lord & Taylor today. And while the shopping center includes luxury retailers such as Louis Vuitton and Tiffany, it's also managed to attract the so-called Digitally Native Brands as Warby Parker Eyewear Maker, Untuckit Retailer Shirt, Athleisure Fabletics and Riley Rose Cosmetic Chain to open stores there.
The related property of the Hudson Yards in New York is a further development to imitate the so-called shopping mall of the future model, with places to live, work, dinner and shop, and an entire floor dedicated to online brands.
However, there is still not much evidence to support the idea that bringing "experienced" tenants to shopping centers will increase activity there. A recent Thasos Group study found shopping malls with so-called experience tenants who are not just selling products – such as Apple, Eataly's Italian dining hall and Tesla – have not yet run more. Until the last three months of 2018, indoor shopping malls with "experience" tenants did not benefit from greater shopping traffic for year-year-over-year compared to indoor centers without any of these unique, nonapparel tenants, Thasos said.
However, there is evidence that when shopping center owners make additions, such as office space and apartments to their properties, sales per square foot – a key metric tracked by industry analysts – will increase significantly.
Macerich, one of the few publicly traded shopkeepers who posted a square foot sales metric for each of her assets, changed the Tysons Corner Center in Virginia to include a 1.5-acre outdoor square for events, a 22-story office tower, 28-storey residential tower and hotel Hyatt.
Tysons Corner is from putting in $ 645 in sales per square foot in 2009 to nearly $ 1,000 by the end of 2017, BTIG REIT analyst Jim Sullivan said. "Using some of these mixed use assets … you have a really dramatic productivity gain."
Macerich is also one of the first shopping mall owners to add collaboration spaces to their shopping malls and fill the space once they are used by department stores. Other REITs are also trying it out. Unibail-Rodamco-Westfield added WeWork at the Fulton Center in New York. And Pennsylvania REIT recently added coworking space to Cherry Hill Mall in New Jersey, for the first time it worked with this type of tenant, with plans for more. The space, called 1776, sits directly at Forever 21 and Nordstrom, and can accommodate more than 200 members.
Meanwhile, Simon Property Group, the largest store owner in the US, recently broke ground at its rebuilding of the Phipps Plaza Mall in Atlanta. It will include Nobu Hotel, a 90,000 square foot Life Time fitness and entertainment center, and a 13-story office tower once completed.
CEO Simon Simon Simon just spoke to analysts this week about some remodeling of the mall owner, adding that "he cannot guarantee" that there will be no more shakes in the retail industry this year – such as closing trades and bankruptcies.
Later this month, all these shop owners will meet in Las Vegas for an annual conference on business real estate held at the International Council of Shopping Centers, the largest gathering for the industry in the world to discuss how companies are struggling to close deals. , working with upstart digital tags to open up stony stores and more.