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Large Malls Test The Power of Small

Large malls across the country are learning the power of small.

Small, independent retailers, many of them mom-and-pops selling off-beat items, are increasingly popping up in shopping malls that have historically been filled by big brand-name retailers such as the Gap, Foot Locker and Victoria's Secret.

"We've lost some big boxes to bankruptcies, and that's opened up a lot of vacancies in our properties, said Greg Maloney, president and CEO of Jones Lang LaSalle Retail, which manages more than 98 million square feet of retail space in 350 malls and other properties. "We're taking a look at anything to generate traffic."

Maloney said that among the tenants who likely couldn't have landed a mall spot in the past are independent retailers, medical centers, even churches and schools.

"Both independent and non-traditional tenants saw an uptick because there was more space available," said Jesse Tron, a spokesman for the International Council of Shopping Centers, a global trade association. "A smaller local retailer probably fits the retail mix better than those non-traditional tenants. Centers are adapting."

High-end malls are least likely to sign such deals, simply because they've continued to sell their space, Tron said.

John Myers had a business for years in upstate New York renting inflatable bounce houses and other equipment for backyard parties. He wanted an indoor location, and in the fall of 2010, he rented space in the Aviation Mall in Queensbury, N.Y., north of Albany.

He was only there a few months when an Old Navy store moved out, so he negotiated with the mall to take on 18,000 square feet of space. The indoor business, the Party Palace, caters to children's parties. It offers miniature golf, inflatables and a stuffed-animal center. It does best in the winter, but foot traffic drops in warm months.

"I'm definitely not getting rich," he said. "It breaks even and makes some money here and there. If I didn't have the outside rental business, I don't think I could make it there."

Still, he said, he's used it to make the business more year-round, and he's been happy to be in the mall. He's in the process of negotiating another year on his lease.

Maloney said sales forces seek out such businesses, often offering leases of a year or less. Mall tenants typically sign multi-year leases. The shorter contracts allow the independent shops to try out mall life, and vice versa, he said. If the center is unhappy with the tenant, they aren't committed to a long-term deal.

Joe and Wendy Cucinello, a Sterling Heights, Mich., couple who had worked as automotive engineers, are running their own specialty olive oil store, Giuseppe's International Oils & Vinegars, at the Mall at Partridge Creek in Clinton Township, Mich. It sells olive oils infused with flavors such as butter, blood orange and wild mushroom and sage. The oils sell for $11.95 to $30.95 and can be tested at the store.

"It's kind of one of those dreams you have, to have your own" business, said Joe Cucinello, 31.

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