The fall of malls

As retailers struggle, what’s next for malls in Louisiana?



From 2001 to 2004, I spent anywhere from 40 to 60 hours each week inside Woodfield Mall, a megalithic, multi-floored temple of consumption in Schaumburg, Illinois. I worked at a clothing store there, and I did not have a car. So a few hours before my shifts began, my mother would drop me off at the mall's entrance so I could wait, in the mostly empty building, for my store to open.

  During those long hours, I'd walk between the stores with their gates pulled down, looking into windows and listening to my own footsteps. I watched hard-hatted maintenance crews assemble a 50-foot Christmas tree, handing one another ornaments like the burly members of an unlikely family; I dodged power-walking seniors in apricot tracksuits; I drank bad coffee from the mall McDonald's, which opened early.

  You'd think all that time would have made me hate malls, the way people who have worked in movie theaters never want to eat popcorn. But they're still one of the public spaces where I feel most comfortable. And I've watched with growing alarm as storied department stores have shuttered (a March statement from Sears: "substantial doubt exists related to [our] company's ability to continue"), and as business analysts forecast the death of malls as we understand them.

  Here's what's happening — and how malls in southeast Louisiana are changing with the times.

The new management group at The Outlet Collection at Riverwalk spent $80 million revitalizing the property. - PHOTO COURTESY THE OUTLET COLLECTION AT RIVERWALK
  • Photo courtesy The Outlet Collection at Riverwalk
  • The new management group at The Outlet Collection at Riverwalk spent $80 million revitalizing the property.

Throughout 2017, news and retail industry reports have tracked the decline of the mall as a phenomenon stemming from fundamental changes in the way Americans shop. As with most shifts in the modern economy, the threats to retailers and the malls that house them are multivalent. Aftershock from the Great Recession, new technologies including e-commerce and price-comparison tools and demographic changes (including the rise of Millennials — who are said to prioritize spending on experiences, rather than good old-fashioned stuff) all contribute to a difficult environment even for the most venerable companies.

  Well-known brands such as JCPenney, Macy's, Payless ShoeSource, The Limited and Bebe recently announced plans to close stores or restructure. In April, the financial services firm Credit Suisse issued an analysis noting that year-to-date closings of retail stores already have eclipsed the number of stores that closed for all of 2008, at the height of the Great Recession. A May Bureau of Labor Statistics report noted an average monthly loss of 9,000 retail jobs this year (compared to 17,000 jobs gained in the sector each month in 2016).

  As the lights go out at retailers, malls struggle, leaving eerie, abandoned mall complexes scattered throughout the suburban landscape.

  According to a CBS News report, there were as many as 1,500 enclosed shopping malls in the U.S. in 2005; today there are fewer than 1,100. Credit Suisse estimates 25 percent of those remaining malls may close by 2022, especially if they continue to experience closures at "anchor" department stores.

  "The department stores are probably [doing] the worst out of anybody," says John Healey, a Tulane University marketing professor who teaches retail cases in his classes. "Obviously, that's the largest tenant for [malls]. They get their most income out of them and [department stores] serve to draw people into the malls, so losing them would be fairly devastating for the actual malls themselves."

  The problem isn't so much that people aren't buying things, but the way they are shopping is changing, Healey says. Online retail has had unanticipated effects on brick-and-mortar retail sales. Shipping from online retailers has gotten cheaper, and search and price-comparison apps and tools have made shoppers more price-sensitive — a particular problem for anchor stores, which often carry brands that aren't exclusive to their store. Healey also notes a rise in "showrooming," in which a customer might find and try on a sweater from a popular brand in a store, then look for that same item online for a lower price.

  At Lakeside Shopping Center, leasing and assistant general manager Tricia Thriffiley Phillpott finds contemporary shoppers are more focused and less likely to browse just for the sake of shopping. "[Our shoppers have] done their research before they get here," she says. "The customers that are coming here know what they want to buy."

  The shifts in sales that accompany these behaviors alarm retail executives, especially in view of the broader economic recovery. Unemployment is low, and polls that describe consumer confidence (such as Gallup's weekly U.S. Economic Confidence Index) show that people are feeling good about the economy. So why aren't people spending more money?

  "Everything else in the macroeconomy looks great for [retailers]," Healey says. "This should be the timeframe that they're booming, but they're not. ... There's an overall shift in how people are shopping, and that shift is coming at [retail stores'] expense."

Aside from general retail industry woes, traditional malls are operating and maintaining an expansive property with lots of inconvenient built-in dead space. Traditional malls are real estate companies at heart. (For example, the Mall of Louisiana in Baton Rouge maintains 8,400 parking spots.) Mall management companies must attract retail tenants who consistently attract people to the mall, or at least do well enough to pay their rent.

  But as retailers struggle, many of those mall-centric real estate entities have found themselves overextended, with a portfolio of underperforming and underpopulated shopping centers. The company that manages Baton Rouge's Mall of Louisiana, General Growth Properties, found this out firsthand in 2008, when it was forced to sell off many of its lower-performing properties in bankruptcy — a situation which may spread to other mall management companies.

  "What we're seeing, really, right now is there's about 26 square feet of brick-and-mortar real estate in the United States per person, which is far more than any other developed nation in the world," says Jacob Wilson, general manager at Mall of Louisiana. "People saw that malls, the concept, [were] doing really well. ... That development just kept happening, until the point when we became overdeveloped. [Now] it's the correction."


Malls in and around New Orleans are placing big, expensive bets to ensure their continued survival.

  As representatives from The Outlet Collection at Riverwalk, Esplanade Mall, Lakeside Shopping Center and Mall of Louisiana explain, the idea is to reimagine the mall as an entertainment destination rather than just a place to buy new pants and Christmas gifts. (A representative from The Shops at Canal Place declined to be interviewed for this story; Oakwood Center is owned by the same parent company as Mall of Louisiana.)

  Brenda Canada, the vice president of retail attraction development and strategy at the New Orleans Business Alliance, says the mall-as-entertainment-destination concept is the new model in the industry.

  "Malls across the country are much more focused on food and entertainment these days than they are on new retailers," Canada says. "(For example), before there were mostly food courts in malls. And now people are putting full-price, full-service, white-tablecloth restaurants in malls as a draw."

  At Lakeside Shopping Center, Phillpott says the current buzz phrase is "restaurants are the new anchors." This trend reflects another cultural shift related to the way Americans eat; as reported in by U.S. Department of Agriculture food expenditure data, people are spending more money in restaurants (as opposed to buying groceries) than ever before.

  To chase those dining-out dollars, Lakeside spent $5 million remodeling its food court, built a location for the casual-dining chain The Cheesecake Factory and recently issued a press release announcing a new steakhouse with an extensive wine program. Mall of Louisiana now has eight full-service restaurants. A revamped food court, with 200 balcony seats overlooking the Mississippi River, was one of the first priorities for the remodel of The Outlet Collection at Riverwalk, general manager Frank Quinn says. (Healey, the Tulane marketing professor, also points out that restaurants are, at least for now, less vulnerable to technological change than retailers.)

  Local malls also are pursuing something called "experiential retail," both in stores and across the mall campus. Sales staff always have offered a human touch in stores, but in an increasingly competitive marketplace, retailers are conceiving of services and events that might entice recalcitrant shoppers — even when those events cost time and money to produce.

  "[One of my tenants told me] 'It's not 1992 anymore,'" Phillpott says. "You don't sit in your store and wait for people to come to you." In practice, what this might mean is cooking classes at Williams Sonoma or interior design services at Pottery Barn, plus community activities that make use of the mall's vast footprint as a "third place" (neither home nor work).

  At The Esplanade in Kenner, new management company Pacific Retail has experimented with job and health fairs, live music, pop-up shops, parking lot carnivals and games, some intended to attract what historically have been one of malls' most consistent (and often lucrative) visitors: teens, who "have the time and sometimes the money to spend," according to marketing and business development manager Ellie Thomas.

  Area malls also are incorporating technology to make the mall experience more pleasant and enticing to shoppers. Mall of Louisiana and The Esplanade each have their own app; if you visit Mall of Louisiana's app, you can find real-time updates on where you might find a good parking spot. The Esplanade offers a text-to-answer service you can text from inside the mall (e.g., "Where's the closest restroom to me?") and receive an answer within two minutes. Most area malls are equipped with high-speed Wi-Fi, and charging stations for cell phones have sprouted like mushrooms. After all, if you don't have to go home or to your car and charge your phone, you may just stay and shop a little longer.

  Malls also are renovating their environments, modernizing spaces and making them more luxurious. These improvements start with basic sprucing-up, like pressure-washing grungy exteriors and trimming foliage that might have obscured signs (both of which took place immediately after Pacific Retail took possession of the The Esplanade, Thomas says). But more intensive renovations have been completed recently or are underway at several mall sites throughout the area.

  Since 2008, the Mall of Louisiana completed an outdoor promenade and shopping area to allow shoppers both indoor and outdoor shopping, depending on their mood and the weather. When property management company The Howard Hughes Corporation took possession of The Outlet Collection at Riverwalk, it initiated an $80 million renovation, including a complete revamp of the building's interior and redrawn store footprints to suit different types of tenants. Over the next three years, Lakeside will undergo a $10 million renovation that includes new soft seating areas, skylights and Carrera marble columns; new concentric-circle light sculptures already hang in the building.

  It might seem counterintuitive to pour money into renovations at a time when the greater industry is flailing, but there's a broader strategy at work. Shoppers reap the benefit of enhanced mall environments, but renovations really are targeted toward tenants — especially high-profile brands, such as the fast-fashion retailers (e.g., H&M) that have become popular in recent years. As retailers become more cautious, they're less likely to open more than one store in an area, so malls are doing everything they can to make sure that store comes to their property.

  "At the end of the day, you look at what people want to know about the mall before they get here, and it's 'What stores do you have?'" Phillpott says. "If the stores aren't here, there's no reason for [customers] to come, no matter how nice our sofas are."

Malls see enhanced dining areas, like this one at Riverwalk, - as key to their success. - PHOTO COURTESY THE OUTLET COLLECTION AT RIVERWALK
  • Photo courtesy The Outlet Collection at Riverwalk
  • Malls see enhanced dining areas, like this one at Riverwalk, as key to their success.

Area mall managers say they aren't feeling a strain — for the most part.

  "The idea that certain malls, their time has come ... if they're in the right locations, I believe they're going to do just fine," Quinn says. "There's always going to be some segment of the population that wants to touch and feel and look at the product."

  He says sales at The Outlet Collection at Riverwalk have improved 300 percent since the 2014 redevelopment, and he's counting on a mix of traffic from locals, cruise ship visitors and regional and international tourists to weather any difficulties. According to Wilson, Mall of Louisiana records about 3,000 sales transactions each year from international visitors who register with the Louisiana Tax Free Shopping Program for International Visitors. Mall of Louisiana and Lakeside Shopping Center also draw a sizable tourist crowd.

  The unusual geographic isolation of the New Orleans metro area also could contribute to its malls' continued success. Lakeside Shopping Center is what's called a super-regional mall, a type of shopping center that typically draws shoppers from a 25-mile radius, but Phillpott says her data shows shoppers coming from Houma, the Northshore, Lafourche Parish and Mississippi. The LA Tax Free Shopping Program shows Lakeside had more than 7,800 international visitors in 2016. And Canada, the retail attraction specialist, says Orleans Parish in particular has been thought of as "under-retailed," because many national brands have yet to establish a presence in the parish.

  There are signs of distress here and there. Sears recently closed its store at Oakwood Center; Macy's moved out of The Esplanade. Thomas says the mall is considering a number of things that might fill that empty space. Unlike many department stores, the Esplanade Macy's was built recently, so she has hopes for a good tenant — perhaps even a tenant from another industry outside of retail, such as medical or business offices.

  In her role as a leasing manager, Phillpott says she has noticed a less "seamless" process in the way retail spaces within the mall are populated. When a tenant moves out, there isn't always an immediate replacement that's appropriate for the space like there was at one time.

  And just about everything hinges on the continued growth of the economy. A downturn, with its cascading effects on real estate investments, construction, retail spending, tourism and more could be catastrophic for local malls. As just one example, new full-service restaurants could sit empty as belt-tightening Americans begin eating at home again.

  Tulane's Healey says Lakeside Shopping Center in particular might be in a good place, especially with the loss of anchors at Oakwood Center and The Esplanade. He says its renovation efforts could backfire if the costs have to be passed on to customers, but there's a possibility the move could make the mall more attractive. Several area malls also feature stores which are "unique-to market," meaning you can't buy their products anywhere else nearby — an advantage in the troubled retail sector.

  But only time will reveal which malls will still be part of our lives in the future, or what they'll look like when we get there. "There's certainly some shifts happening in the retail world," says Wilson, the Mall of Louisiana manager. "It's ever-changing and you have to keep up."

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