Mall Identity Crisis As Even Official Body Ditches Shopping Centers
Once upon a time, life was so simple. You bought stuff in shops and those shops were with other shops in a place called a shopping center, where you went shopping.
But such is the existential crisis gripping mall owners that even its own global trade association – the International Council of Shopping Centers – has announced a rebranding that includes neither shopping nor center in its name, amid an intended radical update of its image.
Determined, however, to keep its acronym, the International Council of Shopping Centers announced Monday that it will now identify as Innovating Commerce Serving Communities. Or ICSC, for short. No, me neither.
While the 65-year-old trade group chose to maintain the acronym to respect its history, the changed words reflect the shift in how ICSC members — which include most major U.S. mall and shopping center owners — are evolving in a world radically altered by e-commerce, shifting consumer priorities, the rise of multiple trends such as the environment, upcycling, rental and the leisure economy, plus the small matter of a global pandemic.
“The terminology ‘shopping centers’ or ‘retail real estate’ are still clearly an important part of our membership,” ICSC President and CEO Tom McGee said as he explained the change. “But they’re somewhat descriptive to the historical nature of who our membership was, from a demographic standpoint…the property type that it was. As opposed to the impact that the industry has upon communities.”
McGee said that today’s ICSC’s membership of roughly 50,000 is expanding to include a raft of other businesses and more particularly ICSC hopes that ‘Innovating Commerce Serving Communities’ will promote the retail industry as a community builder, career developer, job creator and economy driver. That is at sharp odds with the history of an industry that has more often been blamed for out-of-town malls emptying the stores out of Main Streets.
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Those days may have largely passed, with online shopping more likely to be cited as the reason for store closures, but it is clearly a legacy the body wishes to leave behind.
U.S. Malls Face Uncertain Future
The news comes at a time when retail property landlords are facing multiple headwinds, with rents and valuations plummeting in some locations. According to research from real estate firm Newmark and Moody’s Analytics REIS, the vacancy rate for malls in the U.S. rose to 11.4% in the first quarter of 2021, the highest in a decade.
Even the biggest real estate players have had to make some tough calls. Earlier this year Brookfield Property Partners entered a so-called ‘friendly foreclosure’ on three of its struggling malls: Florence Mall in Kentucky, Bayshore Mall in Eureka, California and the Pierre Bossier Mall in Bossier City, Louisiana, with a combined $174.6 million of loans, according to figures from KBRA Credit Profile (KCP). Negotiations on seven further malls, with a cumulative $797.8 million of senior debt, mean Brookfield could potentially foreclose on nearly $1 billion of mall debt.
Simon Property Group has implemented a similar plan according to KCP, foreclosing on Mall at Tuttle Crossing in Dublin, Ohio, and Southridge Mall in Greendale, Wisconsin; while it ended capital support at Montgomery Mall, Philadelphia, and conceded its title at Crystal Mall, Connecticut. Recently Town Center at Cobb Mall, in suburban Atlanta, foreclosed to Deutsche Bank.
Mall Groups Accumulate Struggling Retailers
Radical times require radical actions. The malls Brookfield foreclosed have all lost at least one department store anchor, or house anchors in potential distress. So when Simon Property and Brookfield jointly bought department store chain JC Penney out of Chapter 11 late last year, the rationale was not only to address anchor closures but to prevent exits by other retailers with co-tenancy agreements.
Simon has even formed SPARC Group as a joint venture with Authentic Brands Group to acquire retail brands. The two companies now hold a portfolio that includes Aeropostale, Brooks Brothers, Eddie Bauer, Forever 21, Lucky Brand and Nautica.
Meanwhile, Paris-based Unibail-Rodamco-Westfield (URW) is preparing to depart the U.S. altogether and is likely starting its sell-off of its 28 U.S. Westfield malls in 2022 following an investor insurrection in Europe, with rebel shareholders labelling the U.S. a vanity project.
On a conference call with analysts, newly-instated CEO Jean-Marie Tritant, said: “I think that the U.S. market has to go through this somehow cleaning process, all these B and C malls that need to close. And I think that a lot of retailers have already started to exit these assets.”
That’s right, assets. Just don’t call them shopping centers.