News of the demise of the shopping mall has been all over the press lately. But despite the conviction with which some people are telling this tale, you're not getting the whole story. It's true, we don't build 1980's malls anymore … and that's a good thing! The industry is evolving — not only the retailers, but also the properties themselves.
According to the National Council of Real Estate Investment Fiduciaries and the International Council of Shopping Centers, the demand for retail space is outpacing supply and shopping-mall occupancy rates have returned to pre-recession levels at 93.6 percent. Furthermore, the U.S. Census Bureau reported that 94 percent of retail sales are made through in-store purchases — so while online shopping continues to grow, the in-store shopping experience is still front and center.
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Step into a shopping center today and you might not recognize your surroundings. Upscale restaurants, IMAX theaters and a myriad of service offerings have replaced the traditional retail-only, food court-centric destinations of your youth. The new shopping center is a social hub and holistic experience center of the future with something to offer all ages and interests.
Here are three major shifts you might see at your local mall:
The mall gets a facelift. Thanks to visionary architects, shopping centers today are more modern and built to enhance the overall consumer experience. Consider what real-estate developer Taubman is doing with its new shopping centers around the country. The Mall at University Town Center, which opened this month in Sarasota, Florida, has been designed with the local lifestyle in mind: metal and glass aesthetic, natural stone and water features, an elegant 1,100 foot curvilinear vaulted skylight for energy-saving purposes and electric-vehicle charging stations. In Salt Lake City, Taubman's City Creek Center boasts upscale shopping, a man-made creek and a retractable glass roof to provide customers with an open-air experience throughout the year, no matter the weather conditions.
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Older shopping centers are receiving much needed facelifts, too. Real-estate owners across the country are breathing new life into their properties by ridding their buildings of fluorescent lighting, fake plants and outdated paint schemes. In Minnesota, the famed Mall of America is undergoing a $50 million, multi-phase makeover. The mall will receive improvements to its interior that include replacing green and gold colors with more white and gold, and installing a large, continuous skylight to bring in more natural light. This big spending on reconstruction and renovation is a common theme throughout the nation: Macerich's Los Cerritos Center in California received $40 million in renovation funds and Simon's King of Prussia Mall in Pennsylvania has allocated $150 million for reconstruction efforts. Structural renovations, interior design and remodeling have all helped bring shopping centers out of the 1980s and into the 21st century.
Shopping centers meet entertainment centers. As Americans have changed the way they socialize and spend free time, so too has the American shopping mall reinvented the consumer experience. Today, the shopping center is not just a place to shop; it is an entertainment destination for quality time with friends and family.
Last month, as families prepared for the start of a new school year, parents shirked online buying and instead headed to the stores. This was due, in part, to the desire to take advantage of in-store sales and the hands-on experience of trying on clothes and testing out new gadgets. But it was also a result of parents' desires to savor the last days of summer and spend quality time together with their children as a family.
Shopping centers across the country have incorporated upscale restaurants, miniature golf courses and other entertainment offerings into the mix. In Michigan, Rouse Properties' Southland Center is undergoing new renovations which will include a 12-screen, 50,000 square foot Cinemark theater and Eastern Hills Mall in New York has an indoor ball field and batting cages and it is planning for an outdoor skating rink. Among these many entertainment options, shopping centers also play host to fashion shows, art exhibits and music performances throughout the year.
More services bring convenience. Shopping centers are also bringing in new service establishments to drive traffic and add the convenience of one-stop shopping to consumers' lives. According to ICSC analysis and CoStar data, non-retail, non-restaurant shopping center space rose to 22.4 percent in the fourth quarter of 2013 from 20.6 percent in the fourth quarter of 2010.
Salons and doctors' offices are just the start of the new services found at shopping centers today. Staples is partnering with 3D Systems to pilot 3D printing services in select stores across the country and several major real-estate companies, which represent more than 600 shopping centers throughout the nation, have hired outside vendors to offer home-delivery services. Now, at these locations, customers can have their in-store and online purchases delivered to their door in a convenient and timely manner, instead of schlepping heavy bags home themselves.
Real estate and retailer innovations made to adapt to ever-changing trends and consumer needs is not only good for business, it's great for consumers, too. So while today's malls and shopping centers may not resemble the ones your parents grew up with, one thing does remain a constant — they are still far and away America's favorite place to shop.
Commentary by Michael P. Kercheval, the president and CEO of the International Council of Shopping Centers (ICSC). The ICSC has more than 67,000 members in over 100 countries, include shopping-center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. Follow the ICSC on Twitter @ICSC.