With a record 8,640 retail stores expected to close in 2017, American malls are desperate to draw in customers as America’s retail apocalypse leaves them littered with empty store fronts. Now, some are experimenting with a model that worked for some movie theaters: Invest in restaurants and popular amenities like rock-climbing walls to sell customers a better shopping “experience.”
To wit, Bloomberg spoke with the owner of the Newgate Mall, which plans to pour $500,000 into overhauling the outdated food court in a bid to lure restaurateurs and hungry shoppers. Rent payments from eateries are never going to recoup the renovation costs, but for landlord Time Equities Inc., that’s not the point.
“The food hall is part of an effort to breathe new life into the entire 718,000-square-foot (67,000-square-meter) center and increase foot traffic, according to Ami Ziff, director of national retail at New York-based Time Equities. The company, which bought Newgate in Ogden, Utah, from GGP Inc. for $69.5 million last year, is one of many landlords wagering that elaborate makeovers will keep them competitive as they reinvent their properties in the age of Amazon.
Costs are escalating as mall owners work to keep their real estate up to date and fill the void left by failing stores. The companies are turning to everything from restaurants and bars to mini-golf courses and rock-climbing gyms to draw in customers who appear more interested in being entertained during a trip to the mall than they are in buying clothes and electronics. The new tenants will pay higher rents than struggling chains such as Macy’s and Sears, and hopefully attract more traffic for retailers at the property, according to Haendel St. Juste, an analyst at Mizuho Securities USA LLC.
“The math is pretty obvious, pretty compelling, but there are risks,” St. Juste said in an interview. “This hasn’t been done before on a broad scale.”