As anchor stores close, aging malls fizzle
SPRINGFIELD, OHIO – Across the street from a shuttered Kmart and a boarded-up Chinese restaurant, the parking lot at Upper Valley Mall sits mostly silent on a recent weekday afternoon.
Soon, Springfield residents will have two fewer reasons to come to the mall: Macy's and J.C. Penney, two of the four anchor stores since the shopping complex opened in 1971, will be gone – casualties among a national mass of chain store closures.
"Pretty soon, it's not even going to be worth the turn to come out this way," said Melissa Pullen, 28, standing outside Macy's after buying a pair of pants.
Macy's, J.C. Penney, Sears, Deb Shops, RadioShack and Wet Seal are among retailers closing thousands of stores over the next year. For some areas still navigating a slow climb out of the recession, their exit is yet another setback to revitalizing communities struggling with population declines and anemic job growth.
As newer and more recently redeveloped malls lure shoppers with trendy restaurants, spacious open-air layouts and popular fashion brands such as H&M and Zara, aging malls that have failed to reinvent themselves continue to see stores go dark and foot traffic dwindle.
Competition among brick-and-mortar destinations and Internet shopping aside, the shopping mall remains popular among consumers. Annual sales per square foot were at the highest in nearly two decades in 2013, according to the International Council of Shopping Centers, an industry trade group. But success at newer malls can mean older complexes – especially regional malls in small-town markets such as Upper Valley – take a hit.
"There's a concentration taking place in the sense that the best properties are getting better at the expense of some of the weaker properties," says Paul Morgan, who follows retail real estate companies for investment bank MLV.
Neighboring cities have cannibalized Upper Valley Mall's shopping base with newer, bigger developments. In 1993, Fairfield Commons Mall opened in Beavercreek, a 25-minute drive away. Its biggest draw at the time: a Kohl's. The Greene, an upscale, open-air town center complex, also in Beavercreek, opened in 2006.
Closer to Upper Valley Mall, there's Springfield's Bechtle Avenue, a monstrous development of big-box stores and strip malls that began popping up in the early 1990s. It's drawn mall shoppers with brands including Walmart; Bed, Bath and Beyond; Target; Chipotle; and Panera Bread.
What's left of Upper Valley does little to entice shoppers. The Elder-Beerman department store left in January 2013, replaced with a science museum. There are at least seven empty storefronts. There'll be at least two more soon, on top of Macy's and J.C. Penney. RadioShack beckons with "Clearance blowout 20%-50% off" signs. It's among potentially more than 1,700 closing since RadioShack filed for bankruptcy last month. A Deb Shops is also closing, among nearly 300 stores closing nationally by the teen apparel retailer, which is folding.
Macy's sales associate Tiffany Maloney, who grew up in Springfield and has worked at Macy's since August, said the mall is "imploding."
An American Eagle Outfitters, Victoria's Secret and Claire's remain open. So do a handful of shoe stores, jewelry stores and trinket shops such as Spencer Gifts, a store called Emporium and another called Blankets and More. But the lone remaining retail anchor is Sears. Parent Sears Holdings is struggling – it closed more than 230 stores last year. Most were Kmarts, including the one near Upper Valley Mall that closed in December.
Macy's 79 employees can reapply for jobs at other Macy's stores. Of J.C. Penney's 90 employees, the company says, five will transfer to other stores. But for shoppers, the departure of the big department stores solidifies the end of what was once Springfield's premiere shopping destination.
"It don't look good to me," said Keith Pack, 73, shopping at J.C. Penney with his wife, Nancy, 72. "That's going to take all the people from shopping here."
Alicia Level, hanging out at a downtown Springfield coffee shop where her husband, Jesse, works, said she isn't surprised by the mall's demise. "I was just kind of waiting for the whole thing to go down," said the 25 year-old, who grew up Springfield. "People don't seem to really want to spend money around here."
BUYING PATTERNS SHIFT
Malls were traditionally built around major department or chain stores, the anchors that served to entice shoppers. Over the past decade, many chains have had to close stores as tastes and buying patterns have shifted.
Macy's is closing 14 stores in 2015, though it plans to open at least seven stores in the next three years. J.C. Penney is closing 40 stores this year.
"It's not the concept that's a problem," says Jesse Tron, spokesperson for ICSC, "it's an economic story. Less income, jobs, people, money."
Regional malls have had the hardest time of all types of shopping complexes, luring consumers and getting them to spend in the wake of the recession. Profitability per square foot at regional malls was negative from 2011-14, according to the National Council of Real Estate Investment Fiduciaries.
Tron says the decline is likely because discretionary spending is often the first to go when families cut back, while strip shopping centers continue to do well because they have more everyday necessities, and larger regional malls cater to more than one community.
Springfield's population has also been shrinking, from 81,926 people in 1970 to less than 60,000 as of 2013, according to Census Bureau estimates. Nearly a third live below the poverty level.
The city was built on the success of auto and farm equipment manufacturers such as Navistar. Though manufacturing still plays a significant economic role, Springfield has shifted toward the service sector, with the city's largest employer, Mercy Health hospital system, employing more than 2,600.
Springfield tries to entice tech companies with the promise of the low cost of small-city living and cheaper business costs. The insurance industry is seeing some success. But Horton Hobbs, vice president of business development for Springfield's Chamber of Commerce, concedes the area's job market isn't strong enough to warrant a trendy redevelopment of Upper Valley Mall.
"There aren't the highest paying jobs available," he says. "They don't support high-end retailers."
Upper Valley may take consolation in at least one trend: In many cases, losing an anchor store isn't the death sentence it used to be. With the help of the Internet and smartphones, many shoppers show up with a plan, though they may not wander through other stores, Tron says. Increasingly that's forced malls to think outside traditional retail, creating destination environments that entice consumers to stick around.
The most successful malls have become one-stop-shop lifestyle centers, with broader dining options, gyms and health spas, says Mike Kercheval, ICSC CEO.
The idea is that "you should have in a mall something you can't get online," he says.
When Sears closed at Fayette Mall in Lexington, Ky., last January, the mall's management company, CBL & Associates Properties, tore down the store. A Cheesecake Factory and other smaller, specialty retailers, including an H&M and Pink by Victoria's Secret, came in.
"If you just stay with what you have, eventually you become irrelevant," says CBL spokesman Dan Summerlin. "So it's important to look at ways to repurpose and re-energize your shopping center."
UNCLEAR FUTURE
Whether Upper Valley Mall can adapt and transform is unclear.
J.C. Penney rents its space. Macy's, which owns its store, is selling the 156,000 square-foot space, including some of the parking lot. It's too early to say who might buy the property or what it could become.
Mall management is optimistic of a turnaround.
"These openings allow us to search all types of alternative retail and development in order to meet the needs of the Springfield market and our customers," says Jim Roberts, a spokesman for Urban Retail Properties, which operates Upper Valley Mall and more than 80 other retail properties across the country.
Urban Retail declined to discuss specifics, but it has experience overhauling depressed shopping sites. According to its website, it has revitalized several, bringing in big-box stores or tenants such as colleges, and has experience filling malls with multiple vacancies.
Hobbs sees potential for a sports complex or combination of shopping and recreation. The space could be attractive to big-box stores, he says. But so far, there haven't been talks with anyone in particular.
"The only way that mall works today is to be completely reimagined,'' Hobbs says. "This is a massive property, with a sea of parking. It's a big deal to that part of the community, and there will be a big void there if that area doesn't revitalize."
Hobbs helps organize a lot of community meetings. The Chamber of Commerce has met with Macy's, keeps in touch with Urban Retail Properties and has asked planning firms for help with potential revitalization studies. Hobbs also fields calls from still-operating mall tenants suggesting replacements for the departing anchors.
"It's definitely becoming part of the larger conversation about what we need to do in our community," he says. "There certainly is this desire not to just wipe your hands and walk away."
For Macy's employee Maloney, the imminent store closures feel like deja vu. The 27-year-old was due to give birth to her third child March 11. She was pregnant with her first child eight years ago when she was working at the mall, at a pet store that went out of business just before she gave birth.
"It's not really going to sink in," she says, "until I can't come to work and the doors are locked."