The Mall Shakeout 

With the influx of so much retail space, where will customers come from?

That’s not to say The Shops at Willow Lawn is oozing success. Tower Bookstore recently closed and Dillard’s — its last remaining anchor — will close in October. Inside the mall, which on muggier days reeks of a damp basement, many retailers have left.

But with Stony Point Fashion Park and Short Pump Town Center opening next month, Willow Lawn offers an important lesson in survival. Built in 1956, it’s lived twice as long as the average mall by adapting to changing demographics and replacing department stores with destination retailers and unconventional anchors, including a Kroger grocery store.

When the two new “lifestyle centers” open next month, the euphoria over Nordstrom, Saks and a plethora of new-to-Richmond upscale boutiques is expected to cause a retail stir in metro Richmond like never before. Instead of “me too” malls, the centers will bring a new shopping concept that has local mall operators on edge.

“With these new centers coming in, there is going to be a redivision of the pie,” says Bill Siebenaler, senior manager of property management at Chesterfield Towne Center. “No one is real certain about how that pie is going to be split, where the market share garnered by both of these developments will come from. … The market is not growing as fast as the retail segment. How that is going to affect us, we don’t know.”

From the observation deck, Richmond is an anomaly: Within two weeks, the local mall supply will jump from 3.2 million square feet to 5.13 million square feet in a market that is already saturated, experts say. The country is just awakening from an economic slumber that has particularly hurt midtier department stores such as Hecht’s and JCPenney (Although both saw sales jumps in July). And with the influx of big-box retailers, the amount of retail space per capita far outpaces the national average. In other words, supply appears to be outweighing demand.

For example: Including Stony Point and Short Pump, the amount of retail space per person (excluding restaurants) in the metro area is 36 square feet, according to Grubb & Ellis/Harrison & Bates. The national average is between 19 to 21 square feet per capita.

“I am unaware of any market in the U.S. that has seen so much retail space come onto the market in such a short period,” says Kenneth M. Gassman Jr., a Richmond-based retail consultant. “I think this is going to be a case study.”

The topic: Where will the customers come from? Gassman says the inevitable fallout will probably start at Regency Square, and move on to Chesterfield Towne Center, the two most established malls in the market. The question isn’t if, but when the new centers will eat into the market share of the older, less-fashionable competitors.

“Consumers only have so much money in the Richmond area to spend,” Gassman says. “I think all the existing malls are going to give up some market share.”

Gassman isn’t sure how quickly or how vast the impact will be. The new centers aren’t exactly malls, or lifestyle centers, but a combination. And many of the retailers at both malls are upscale, and new to Richmond.

Lifestyle centers came into vogue in the late 1990s, and in many markets have coexisted, and sometimes even complemented established regional malls, according to the International Council of Shopping Centers. Typically lifestyle centers don’t have department store anchors and are much smaller than regional malls. Stony Point and Short Pump, however, are hybrids: Both have large department-store anchors — upscale and midtier — as well as hundreds of smaller shops and restaurants.

While initially touted as purely upscale, the new centers will include department-store chains already in Richmond — Hecht’s and Dillard’s — only much bigger versions and with a wider array of merchandise than similar stores at Regency Square, Chesterfield Towne Center and Virginia Center Commons.

Sid Welch, general manager of Regency and Stony Point Fashion Park, says the key drivers at Regency are no longer the department stores, anyhow.

“The anchors are definitely important. But the smaller stores, the specialty stores, have been the driving engine,” he says. “The anchor stores have not shown increases, but the small stores have shown significant increases.”

Department stores are traditionally the mall’s lifeblood. Throughout the last four decades, malls depended on successful department stores to drive traffic for the smaller tenants in between. But as stand-alone big boxes came into vogue — offering customers more convenience and cheaper fashions — retailers such as Target, Kohl’s and Wal-Mart began siphoning business from mall-based department stores.

As a result, retail analysts say, department store chains such as May Department Stores, operator of Hecht’s, are suffering from mid-tier limbo. It has difficulty competing effectively with Target and Kohl’s in the discount arena, and its upscale division, Lord & Taylor, recently closed 32 stores in a restructuring effort.

Aside from the merchandising, the older malls will have to contend with changing shopping patterns. Shoppers are spending less time browsing and are looking to get in and out of malls more quickly. Nationally, only 23.4 percent of all shoppers visited malls to browse in 2003, down from 37 percent in 1999, according to the International Council of Shopping Centers. And the proliferation of open-air shopping centers capitalize on just that. In fact, the average shopper spends 75 minutes at the mall and spends about $71.90 per trip, according to the council. At lifestyle centers, shoppers spend an average 57 minutes and spend $75.70 per visit.

Still, Siebenaler says malls will continue to survive, regardless. As long as location still counts — Chesterfield Towne Center is at the epicenter of Chesterfield’s highest-income neighborhoods — and people still like to shop, the malls will thrive.

“The demise of enclosed shopping centers, the epitaph was written years ago,” Siebenaler says sarcastically. “In today’s world, regional shopping centers continue to thrive, and why is that? The reason is that people continue to devise some pleasure out of shopping. People like to be where other people are.”

The key, says Siebenaler, is to simply wait out the storm. He, like other mall operators, anticipates a dip in business as shoppers flock to Stony Point and Short Pump.

“I would think in the first season, you’re going to see a jump,” says John Accordino, professor of urban studies and planning at Virginia Commonwealth University. “If more people with middle incomes find the atmosphere appealing, there will be some permanent switching. But that remains to be seen.” S

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