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A new look and a new name.
Billions are being spent to renovate shopping centers to tailor them to consumers' changing tastes and shopping patterns.
And these changes are going way beyond a fresh coat of paint and some new tenants. Often the malls' very identity is changing, and the word "mall" is being ditched.
Ninety regional malls have spent more than $8 billion in renovations during the last three years, according to a study by investment management company Jones Lang LaSalle.
JLL found that since 2014, about 20 percent removed the "m-word" from their official title after renovations. Common replacements: "shoppes," "village" and "towne center."
"Many of the ... properties we looked at are elevating their role beyond purely shopping and becoming destinations for dining out and entertainment, community activities and even lodging and residential," said John Lambert, JLL's director of retail development.
Taking their upgrades one step further, 16 percent of mall landlords have admitted to spending money on "de-malling," JLL found. This could consist of replacing an apparel retail tenant with a virtual reality experience. Or some owners have taken vacated, big-box spaces and turned them into call centers and medical offices.
"As a general rule of thumb, mall owners who place an impactful amount of capital into a renovation hope to see an 8-10 percent increase in sales," said Larry Jensen, director of business development for JLL's National Retail Property Management practice.
"What's the cost of not renovating as shoppers become bored and move on to other venues?" he added in a statement.
Malls are changing their names
Source: Jones Lang LaSalle
Most of the renovation budgets are going toward food and beverage additions, tenant upgrades and entertainment, JLL found. More than 40 percent of malls are upgrading their restaurant options, making it the most popular renovation strategy, for now.
"One of the more common initiatives is [also] to add in supermarkets and grocery stores, on the basis that consumers use these regularly and drive footfall," GlobalData Retail Managing Director Neil Saunders told CNBC. "There is a push to ... move away from the traditional fashion-based offer, which has become less important to consumers."
Then comes nontraditional, yet growing, categories for renovation dollars, including multifamily uses — like apartments, hotels and parks.
Thirty percent of malls surveyed by JLL said they were adding nonretail components to their properties, with apartments being the most popular choice.
Malls are adding secondary uses
Source: Jones Lang LaSalle
Saunders added that on his property tours across the U.S., he's noticed more car dealerships, like those for Tesla, and on-demand health services being successfully incorporated into a mall's floor plan.
JLL has highlighted some of the most expensive mall renovations to date, one of those being the Westfield Century City in Los Angeles. Pouring $1 billion into the space, Westfield has added an Italian grocery marketplace, an Equinox gym and an open space for events, called the Atrium.
A property in Oakbrook, Illinois, owned by General Growth Properties, has created "The District" — a 14,000-square-foot food hall with a mix of local favorites and national vendors. GGP's Oakbrook Center also has a so-called city for kids, known as KidZania, coming in 2019.
Simon Property Group, the nation's largest mall owner, has spent $300 million to renovate The Galleria Houston. Taking a former Saks Fifth Avenue box, Simon added more than 30 smaller, luxury shops — such as Kate Spade and Cole Haan — to fill the gap.
According to Time Equities' Ami Ziff, dollars spent on mall renovations will continue to climb. Ziff's company has amassed a portfolio of malls in secondary and tertiary markets across the U.S.
But he added that the return on investment in renovating "isn't always linear."
"I can't tell you exactly how you're going to make money, but if we spend money on renovations, create a better ambiance, ... we feel strongly more people will shop here," Ziff said.
As retailers' sales rise, rents can climb at a reasonable rate, and tenant retention should improve, according to Ziff. The key, he said, is to someway, somehow, justify the cost of construction, whatever you're going to do.