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POSSIBLE SOLUTIONS FOR VACANT DEPARTMENT STORE SPACE

Published in Shopping Center Business, May 2001  

 

The recent failure of Montgomery Ward and department store closings of Sears, Penney's and others has the shopping center industry, once again, facing the vacant department store dilemma. The industry had similar, but more extensive, problems in the later '80's and early '90's, following the department store leveraged buyouts, consolidations, and bankruptcies. This time, however, there are fewer department stores waiting in the wings to replace the newly shuttered stores. Additionally, some of the other solutions are not longer alternatives. Finally, the actions taken are dependent upon who owns the vacant department and what their objectives are. Unfortunately, they are sometimes incompatible.  

THE MALL'S DILEMMA: RISING VACANCY RATES AND FLAT PERCENTAGE RENTAL OVERAGES

Originally published in Shopping Center Business, October 1997
Over the past two years, I have become very much aware of rising vacancy and flat percentage rental overages in major malls. I am not alone. Many insurance companies, REITS. investment trusts, and other shopping center landlords are experiencing the same. The sameness and boring nature of many malls has seen a decline in customer attraction and sales resulting in slipping occupancy. Fortunately, not all are fully affected. Well-located dominant malls with strong department and specialty store tenants generally are experiencing firm rents and mixed percentage rental overages increases. Furthermore, it appears that leasing representatives are working harder and more creatively to keep occupancy levels up.
 

EXAMPLES OF CONVENTIONAL AND UNCONVENTIONAL MALL SOLUTIONS

 In the February, 1998 issue of Shopping Center Business, I presented an article that addressed conventional and unconventional solutions to mall problems. This article is, in a way, a sequel.
 
The objective of this article is to discuss some examples of conventional and unconventional actions taken by shopping center owners and developers to address mall problems.  There are numerous examples throughout North America of conventional solutions. However, there are far fewer examples of successful unconventional fixes. 
 

POSSIBLE SOLUTIONS TO MALL AND SHOPPING CENTER VACANCIES

Published in Shopping Center Business, May 2001

Shopping malls, long the darlings of commercial real estate, have recently been experiencing rising vacancy, flat or declining overages and, in more instances than most would like to admit, declining values. While almost every mall today is faced with store turnover and vacancy decisions, some problems are much more serious than others. There are many solutions.  Albeit, some are simple, while others are very drastic.  And still others require de-mall conversions. The well-worn solution to mall vacancy is to rent vacant space to other retailers.  For well-located and tenanted malls and centers, this approach is the best course of action, and has been for almost the past 50 years. However, for malls that have been impacted by other mall competition, the loss of a major anchor, changes in trade area demographics, or the addition of major Big Box competition, solutions are usually more difficult. 
 
There are basically two primary approaches to the problem. 
 

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