Sofia: So I am sitting here with one of TD&A’s Principals, Rene Daniel. Rene is a recognized expert in merchandising and leasing regional and specialty centers throughout the U. S. and consults for some of America’s largest shopping center developers. Over the years, Rene has shared his experience with others as dean of the school of leasing at the University of Shopping centers, as a lecturer for the International Council of Shopping centers, and as a speaker, at other industry engagements and today we have the opportunity for Rene to speak about the change in the American retail malls. Welcome!
Rene: Thanks for the welcome and thanks for introduction. Almost sounds like an obituary, but it’s okay, I’m more than happy to talk about what I do and what I’ve done. Thank you.
Sofia: So can you tell me about your experience with retail malls?
Rene: I started in the business quite a few years ago in the height of the growth of retail malls throughout the country. I started working as a leasing person who ran a division for a major developer at the time. I was responsible for 18 regional malls. I had a staff of seven and they were spread out throughout the country.
So I leased shopping centers from as far west as Oklahoma City and as far as out to Maryland and up to Boston and down to Miami. I’ve been all over the place and during that time I got the opportunity to meet with a lot of very interesting people at different points of their career.
I also got to teach a lot of interesting young people who are not so young anymore – now they’re in pretty responsible positions. So I came through the whole mall magic until it died about eight or nine years ago.
Sofia: Wow, that’s awesome. Thank you for sharing. Can you elaborate on some of the largest projects you’ve had the opportunity to work on?
Rene: Well some of the largest projects that I worked on are familiar names to a lot of people in the industry. Very successful malls – Landmark Miami and Burlington Mall in Boston and a number of other shopping centers when I was working for this major developer. Since then I’ve worked on some major major projects in America, including Canal Place in New Orleans and right here in Baltimore – Towson Town – and a number of others in various places. We’ve done a lot of leasing all over the country.
Sofia: What are some of the biggest changes of the last decade for these malls?
Rene: The biggest change is the fact that the larger malls continue to be very successful but there tend to be major changes in the smaller shopping centers; smaller malls have all gone by the wayside. You can take a look at malls being torn down, you can take a look at malls being abandoned. One of the centers that worked up in Syracuse, New York is completely knocked down and the building that was there is gone and is now the hospital.The biggest mall I worked on the local was Towson Town. We did the conversion from two level Towson Center to a four level enclosed mall with total garage parking and lucky enough to have Hecht’s on one end, which was the biggest Hecht’s store in the market.
And that was the biggest Macy’s store on the market. And then we got Nordstrom’s to come. It’s the only mall in America, the only Nordstrom store in America, where the Rack is on the first floor and the normal Nordstrom store is on the top three floors. That was probably the most interesting mall that I ever worked on. A lot of these other malls that have changed are being re-merchandised or redeveloped for other uses. A mall, by my definition, has got all the infrastructure one needs. It’s got the parking, it’s got the utilities, it’s got the roadwork, it’s got the accessibility, so all those things stay the same.
What else can utilize that kind of information is a hospital, number one: local community libraries and police stations and those kinds of things – theaters. Major medical centers that are not hospitals: there are a lot of different uses and they’re coming up all over the place because every market was oversaturated with malls and the fact that the malls all depended upon the department stores.Now, in America there are very few department stores, they’ve all been eaten up by the big guys and things like Sears closing knocks out, you know, an anchor. What do you do when you lose an anchor? You know, you turn that into a Department of Motor Vehicles or something.
The other big change, major change, is the introduction of food markets into malls. So what we always said – there was a different shopping adventure for the woman who’s going… we build malls for women. We built shopping centers for women, not for male customers, but we always kept the supermarkets away from the malls. Well now we want to bring them in because it brings traffic and they people get comfortable going shopping after going shopping. The biggest problem is we built too many malls so everything is oversaturated
Sofia: Based on these changes, have you seen any dramatic changes, per se, in our current city region and shopping center that everyone tends to go to, which is the Towson Town mall
Rene: Towson Town mall has changed completely from the time I did it. First of all, it was totally leased In 1995 when we opened it and it has never been fully leased since then really. They tried adding a high end wing, a very expensive end wing with Cartier as the anchor and a bunch of other stores. Crate and Barrel they took from the fourth floor and built [it] in the old building on that end of the mall and now it’s almost completely empty.
Today there’s one store left, it’s Tory Burch, and everybody else is closing that end. So they’re suffering from a lot of lost revenue on that end of the shopping center. The other changes on the lower level where they put in what is really a Dave and Busters type of game center. And that is in place of one of the best jewelers in the Baltimore market, who has gone out of the space and gone to another shopping center.
So that’s the major changes. What we did when we originally merchandised the mall was merchandise the lowest level, first level to popular price and the prices went up as we went up. But now the fourth floor has become a problem for them to lease. And the second floor where they had the luxury end is empty. Louis Vuitton closed. Tiffany’s everything that was there broke when Cartier went. And of course the big local jeweler went as well.
Sofia: How has COVID-19 affected the way that people interact with malls?
Rene: I think that COVID-19 was responsible for a lot more failures of malls because people just didn’t go out and shop and it was hard for the landlord to pay the mortgage when he wasn’t getting rent from the tenants. So I think that COVID impacted it. A lot of people transitioned to the internet and found that they could operate both what we called on the internet and stores. And they didn’t need all those stores; they didn’t need to have 10 stores in the market.
They could make it with four stores in the market and the balance, the balance of their income would still come in because of the Internet business. The change that COVID really created beyond the problems that the malls were having at the time is that it killed a lot more businesses. COVID is getting to be less and less of a – people would not go out and people would not – you know, the mall was the worst place because there are a lot of people at the same place. Now with COVID being not so big a problem, people are starting to go out again. And the one thing I find with talking to people about what your reaction to COVID not being a factor is – I can see people, I can talk to people and that kind of helped the mall business – what’s left of it – come back.
But the mall business will never be the same, Never be the same because there will never be as many independent department stores, in my opinion, over the next 20 years as there were the last 20 years. Every market that you went to the dominant name is no longer there. Chicago’s Carson Perry Scott, Baltimore was Hecht’s, Miami was Burdines. All of these stores are gone, they’re gone.
Sofia: The retailers that were unable to promote their products online. Do you think they took a large dive in their sales per se?
Rene: They all closed their doors or or they went online. The problem really was, and the problem continues to be… I spoke with a retailer this morning who’s in the shoe business and he’s in the athletic shoe business and he says he can’t stay in business.
And I asked him why? He says, people come into my store, take a picture of a sneaker, they try them on and they say “I’ll be back next week to to buy the shoe.” They go on the internet, find the cheapest place to buy the same shoe. They know it fits, they know what it looks like.It’s easy, anybody can do it. So I’ve got no business here. I’m closing my doors.
So unless you can be exclusive to get a line like a Nike that you can’t necessarily get on the internet. It’s hard to be a retailer without having some presence in both places.
Sofia: How do you think these malls will change in the next 5-10 years?
Rene: All the malls that have closed or have been emptied of stores and those stores will be repurposed buildings – and like I said earlier, the buildings and the infrastructure is there for some major use that won’t necessarily be retail. I just saw a supermarket being torn down in Reisterstown, it’s being converted to warehouse. And the warehouse business, that business is big enough to take over a supermarket space. So that’s a big space, that’s a 20,000 square foot, you know, warehouse or storage facility.
The storage facilities are doing the same thing.
Sofia: So I guess that does answer the question. The next question, do you think that retail malls are sustainable going forward?
Rene: I think that few malls are sustainable. I think that every market will have one really dominant mall, maybe two if the market is bringing up – perhaps three.
But that’s it. The smaller malls will not be successful because the woman likes to drive up to the store. She feels safer driving up to the front door of the store, going in, going out, moving the car around the way than she does walking through the mall. You hear all kinds of stories about parking like at Towson. The parking is all on decks. Almost no surface parking at all, whenever someone gets hurt in there or whether there’s a robbery in there and they talk about it, business at the mall falls off because women don’t find it, if women don’t find it safe, it ain’t gonna make it.
Sofia: If malls don’t last, let’s say, what will retailers do with their business? Do you think they will start to fully have their products as an e-commerce business?
Rene: I think that the – No, I don’t think so at all. I think that retailers now are making more announcements that e retailers, some of the retailers are now making announcements that they’ve gone to bricks and mortar. Amazon’s a perfect example of it because it’s the biggest company around that has never had a store. And now they’re opening up stores – are opening up one in Owings Mills, Maryland. I mean they’re opening up stores. And so that’s really my way of saying that you can’t just be just an internet company; you really need to have some physical presence.
And the question then becomes, where does that physical presence appear? And that makes the specialty centers, what we used to call open malls – we used to call strip centers – more appealing. So you’re now seeing retailers that would never consider going into an open shopping center moving into open shopping centers. And I also think that the convenience factor is very important. The idea of driving up to Starbucks and getting a cup of coffee is a lot more appealing than going into the mall to Starbucks to sit down, order a cup of coffee and sit down. That’s just an example.
Sofia: What are the top tips, you would give clients looking to lease out space in the mall?
Rene: Call me is the top tip. And the second tip is find a professional who understands malls. Malls are a lot more complicated than people think they are. Locations within malls is a very important relationship.
Everybody thinks the only place to be in malls is in the center court. That’s not necessarily true. Relationship to access. Egress. Relationships to vertical transportation and relationship to really, really hot businesses or hot stores and what’s hot over time changes. The first question I used to get asked was where’s The Limited going? I want to sit next to The Limited or where’s the Gap going in, or I want to be next to Old Navy. So the retailers know who’s hot and their position relative to whose hot is how they make this should make the decision.
Sofia: Great. So as an expert on the subject, is there anything else that you would like to share?
Rene: Yeah, I would wrap up by saying that the difference between going into a mall and going to an open center has become magnified by the fact that both opportunities charge a minimum rent. Both opportunities charge what’s called a common area which is the cost to run the center. That’s the cost of electricity, the cost of lighting, the center, the cost of security, etcetera, etcetera. The cost of running them all in today’s world is almost prohibitive to a lot of retailers because they can’t just say the rent is $20 a square foot. If the extras are another $15 a foot, then the real rent, which is how the retailer understands what he’s paying. He’s paying $35 by the same token.
If the guy is looking for a strip center lease, an open center lease, and it’s $20 a foot. But the extras are only $4 and his gross deal is $24. Everybody has to realize that it’s generally a better idea to take a look at the whole package in terms of extras and minimum rent to make those decisions. There’s no way that malls can compete with open centers in terms of what it costs because they have to air condition them. You don’t have to air condition the strip center. So that cost is really what drives it up and also taxes.
Sofia: Well, this was such useful information. I appreciate it and you sharing the change in American retail. Well, thank you!
Rene: Thank you. Thank you.