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June 12th, 2017 at 3:27 pm

Future of retail – what happens to the empty stores?

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Iconic mall-based department chains, like Sears and JC Penney, are announcing hundreds of store closures in 2017. More chains are expected to announce shutdowns over the next decade. Experts say the shuttered locations could turn into other businesses that benefit from the large square footage, like fitness centers, churches, offices, public libraries, movie theaters, and medical clinics.

When Edina, Minnesota’s Southdale Center — considered the first modern American mall — opened in 1956, two department stores, Dayton’s and Donaldson’s, anchored it. Two decades later, Southdale expanded to allow for a JCPenney to move in, and the mall’s sales boomed.

Since then, the department store has served as the mainstay of the indoor suburban mall in the US. But a growing number of locations will close their doors this year.

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In early June, for example, Sears announced that it will shut down 72 more stores including Kmarts and auto centers, meaning over 170 locations will close in 2017. When they shutter, Sears will have nearly half the number of stores it had five years ago. Another popular chain, JC Penney, also recently said it will close 138 stores due to waning traffic and sales. Most of these locations started liquidation in April, and will shut down by the end of June.

And when department stores die, the mall itself sometimes follows, since the former pays a large percentage of the building’s rent. In a new report, Credit Suisse analysts expect that 20% to 25% of malls — about 220 to 275 shopping centers — will shutter over the next five years, largely due to department store closures. Retail experts attribute the traditional mall’s decline to changing habits of American consumers, who increasingly prefer to spend money online or on experiences rather than objects.

Department stores at malls of the future have an opportunity to fulfill other community needs besides commerce, June Williamson , an architecture professor at the City College of New York and an author of “Retrofitting Suburbia,” tells Business Insider. She says the US simply has built too many malls (and thus, department stores).

“The development climate of malls were driven less by demand and more by opportunity,” Williamson says. “As new centers get built, anchor stores are lured away, and a cannibalization process begins … Only so many consumers are going to malls, and they will flock to newer ones. If developers build a new mall, they are inevitably undercutting another property. So older properties have to get repositioned every decade, or they will die.”

The Vanderbilt University Medical Center at One Hundred Oaks Mall in Nashville, Tennessee. Gresham Smith and Partners

The department stores expected to close this year span approximately 36 million square feet of space in malls around the US. Williamson predicts that many will become other businesses that could benefit from the large square footage: fitness centers, churches, offices, public libraries, movie theaters, and even medical clinics.

The latter, dubbed “retail clinics,” have exploded in the past decade. Between 2007 and 2009, the number of visits to retail clinics quadrupled with nearly half of the visits happening on evenings and weekends when doctors’ offices are normally closed. From 2011 to 2016, the number of walk-in clinics in malls rose by 15%, and today, a third of all urgent cares are now inside shopping centers, according to the Urgent Care Association of America. For example, in 2007, Nashville’s One Hundred Oaks Mall turned one of its department stores into the Vanderbilt University Medical Center, which leased over half of 850,000-square-foot building. The other half is still retail space.

Community centers, like parishes and libraries, are also finding homes in empty department stores. In Kentucky, the Southland Christian Church purchased the Lexington Mall for $8.1 million in 2010, and architects redeveloped its Dillard’s into a nursery, school, and worship center that seats 2,800 people.

Other malls have chosen to fill their vacant department stores with treadmills and ellipticals. In Scranton, Pennsylvania, the Steamtown Mall’s former Globe department store became a Crunch gym. When it opened in May 2016, the franchise owner said around 1,000 members, some who live in the mall’s neighboring apartment buildings, had signed up. Later that year, the Milpitas Planning Commission in California approved a plan to turn the abandoned department store in the Milpitas Town Center into a 24-hour gym.

The oldest indoor mall in the US will follow a similar plan. On June 7, the Southdale Center’s JC Penney announced it was one of the dozens of locations set to shutter this year. The mall’s owner is now paying $4 million for the 120,000-square-foot space, which will transform into a Life Time Fitness Club.

All of these retail closures suggest that many malls cannot survive in their traditional form, with a pair of department stores anchoring each side.

They could instead open opportunities for mall owners, developers, and retailers to experiment and evolve.

Via Business Insider

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