Transforming Brick-And-Mortar: How Shopping Is Changing In South Florida
At 7:30 a.m. on a weekday, The Gardens Mall in Palm Beach Gardens is already hopping. Stores are closed and restaurants are shuttered, but clubs of “mall walkers” are going through their paces in air-conditioned comfort across the 1.5 miles of the mall’s smooth, safe floors. By mid-morning, they’ve given way to young parents pushing children in strollers. Then there’s the lunch crowd, followed by after-school clusters of young adults clutching caffeinated drinks or slurping smoothies. Evening brings a mix of serious fashionistas, casual window shoppers and folks out for a bite to eat, all mingling through the stylishly appointed corridors and courts.
It’s a mall that’s in the midst of a remake. “The retail environment is changing, and it is incumbent upon us to change with it,” says Nathan Forbes, managing partner of The Forbes Company, who owns the mall. “We always share with our retailers that change is not a criticism of the past, it simply means that our future is different.”
With its updated restaurant roster, Instagram-worthy calendar of events and diverse line-up of retailers (including new-addition electric car manufacturer Tesla Motors), management at The Gardens Mall is looking beyond the luxury that has always been its trademark, betting on more than shopping to keep itself ahead of the curve—and it’s not alone.
The first enclosed shopping center opened outside of Minneapolis, Minnesota in 1956. Architect Victor Gruen envisioned it as a hub for dense suburban living that would include apartment buildings, health care services and office space. Before Gruen’s Southdale Center, malls operated much like traditional store-lined streets, with their entrances facing outward along a single-story. By contrast, this new retail set up was indoor-oriented, climate-controlled and double-deckered. It was anchored by large stores in order to attract shoppers and promote foot traffic to the smaller shops, and it was centered around a community court featuring fountains, sculptures and an open-air café.
That was the beginning of the American love affair with the mall, a trend that spawned 1,500 new offspring malls nationwide between 1956 and 2005. But by 2007—a year before the Great Recession hit—mall construction came to a screeching halt. A steady drop in retail sales and mall foot traffic caused many industry analysts to declare that the country’s love affair was headed for divorce court. Still others, like retail think tank Fung Global Retail & Technology, are quick to point out that America’s malls are still alive and kicking, and that like relationships, their model is complicated.
The challenge? Reinventing retail in the face of two trends: the rise of e-commerce and the over-supply of malls.
Click-and-Mortar Versus Brick-and-Mortar
Between 2010 and 2016, Amazon’s North American sales quintupled from $16 billion to $80 billion. To give some perspective, Nordstrom’s 2016 revenue was just over $14 billion. Sears had about $22 billion. Macy’s had about $27 billion.
Amazon and its competitors offer customers online deal codes and risk-free, one-click return policies, forcing retailers with physical storefronts to offer similar deals and convenience (albeit with much higher margins).
But online shopping means more than a shift in shoppers expecting instant discounts and 24/7 convenience. For brick-and-mortar stores (and the malls that house them), it also means a serious reduction in the number of people ambling through shopping centers, making fewer primary purchases and fewer incidental purchases. Today’s malls and stores are faced with a mental and behavioral shift in shopping habits: those consumers who think of their living room couch as a fine replacement for their local mall.
Thanks to the building boom of the mid-20th century, the number of malls in the U.S. has grown more than twice as fast as the population, according to Fung Global Retail & Technology’s analysts. So alongside the realities that have come with the rise of click-and-mortar shopping came another realization: there is simply too much brick-and-mortar to support consumer demands. As a result, today’s malls are experiencing what economists refer to as a market correction. With an estimated 26 square feet of retail for every person in the U.S. (compared with about 2.5 square feet per capita in Europe), consumers simply found themselves over-retailed.
"We always share with our retailers that change is not a criticism of the past, it simply means that our future is different.” - Nathan Forbes
Reinvention and Renovation
So what’s a mall to do? Like any industry or individual facing a crossroads, mall management teams have two choices: swim or sink. Plenty of malls across the country have chosen the latter: the news is strewn with vacant malls and some being demolished.
To increase foot traffic and retail revenue, malls like Vero Beach’s Indian River Mall have turned to attracting nontraditional tenants alongside stores we’ve grown to know and love. After Simon Property Group defaulted on the Indian River Mall’s $71.3 million mortgage, the building was purchased by New York-based Kohan Retail Investment Group for the bargain price of $12 million.
Mike Kohan, who leads that investment group, is banking on a higher power to bring customers through his doors: a local church. New tenant Oceans Unite Christian Centre will open a few doors down from anchor retailer Macy’s in early 2018. A remodeled string of five vacant storefronts totaling 17,000 square feet will house a growing congregation of approximately 400 faithful.
While malls like Indian River are thinking outside the traditional tenant box to keep revenues flowing, just down the road at Jensen Beach’s Treasure Coast Square Mall the focus is often on special events that draw diverse groups of potential shoppers through its doors. Beyond its retail offerings and 16-screen theater complex, mall management has doubled down on offering community programming like job fairs designed to give local residents an opportunity to connect with employers, and school-themed bashes aimed at giving tweens and teens the social shopping experience they seek while families prepare to get back to class.
Still other malls in high-density, affluent or tourist markets—such as Town Center at Boca Raton—are doubling down on luxury goods and experiences, sidestepping online competition by catering to those who don’t need to scour the internet for deals. Malls in this category have seen double-digit sales increases over the past five years, according to Deborah Weinswig, managing director at Fung Global Retail & Technology. “The mall is not dead, but it is transforming in order to accommodate shifts in consumer demand,” Weinswig says. “Even though some stores have closed, many new ones are opening and creating hybrid formats we have not seen before.”
"The mall is not dead, but it is transforming in order to accommodate shifts in consumer demand.Even though some stores have closed, many new ones are opening and creating hybrid formats we have not seen before." - Deborah Weinswig
In Boca, Town Center’s management is embracing that hybrid model. The mall is in the midst of a multimillion-dollar makeover designed to make it feel like an expensive resort, complete with upscale restaurants and experiences that extend beyond shopping. “As the market evolves and continues to grow, we saw an opportunity to take the Town Center at Boca Raton to the next level,” Sal Saldaña, the mall’s general manager, told the Sun-Sentinel when the renovation was announced earlier this year. But beyond the new stone flooring, soaring ceilings and sparkling glass porte-cochères, Town Center’s reinvention—slated for completion by the end of 2018—is focused on adding value to the shopping experience and reaching a diverse swath of area shoppers. “The project is a continuation of our commitment to elevate our shopping and dining experience for our customers,” Saldaña said.
While Town Center aims to transport shoppers to a luxury experience, The Galleria at Fort Lauderdale’s thinking is a little closer to home. That is: they’re bringing homes to the mall. Developer Keystone Property Holding Corporation plans to wrap The Galleria in seven towers it calls LIVE Galleria, offering mixed-use spaces and residential units that would include townhouses, upscale condos and senior living residences. It’s a project that mall management is understandably optimistic about: LIVE Galleria could not only create an uptick in mall retail traffic from on-site residents, but also from people who are drawn to the project’s eight acres of planned public spaces—including a park looping the property, outdoor fitness equipment, a yoga area, a dog park, two welcome plazas and a rooftop garden. “At The Galleria, we have a live, work, play philosophy,” marketing director Melissa Milroy says. “Our goal is to be a community partner and offer different experiences from shopping, to dining, to working and beyond. That’s going to be the mall of the future.”
The project faced a setback earlier this year when Keystone retracted its original plans that called for major zoning changes. But the developer has promised to amend the plans to comply with existing zoning rules. Milroy says those amended plans will be ready to be submitted in the coming months. Controversy aside, some version of a living-and-shopping combination like LIVE Galleria is likely in Fort Lauderdale’s future. And if it’s the success that proponents hope it will be, it’s a plan that will surely be aped by shopping centers nationwide.
In many ways, the modern reimagining of the American mall has come full circle, finally becoming the dynamic downtown spaces that Gruen originally envisioned—walkable, mixed-use areas that bring a renewed sense of urbanism and community to suburbia at large.
The question is: Will all of this reinvention work?
Ken Morris, principal at Boston Retail Partners, makes a living providing adaptation advice to some of the country’s largest retailers. And he says the retailers that have adapted well to the new retail environment are flourishing.
The way Morris sees it, people still like to touch, try (and hopefully buy). He predicts that many mall stores will soon look more like showrooms than salesrooms, and he highlights Restoration Hardware as an example. The brand offers storefronts, like the one in West Palm Beach’s CityPlace, where customers can do their research and then place orders for furniture and home accessories. “They provide inspiration and style guidance,” Morris says. “But they’re not really selling anything there. It’s like a giant 3D real-time catalog.”
Morris also points to Apple as a retailer that has prospered by providing customers with an in-store experience where they can try new products, ask questions of sales associates and even get help with past purchases. “Apple stores are full in any mall,” Morris points out.
"Our goal is to be a community partner and offer different experiences from shopping, to dining, to working and beyond. That’s going to be the mall of the future.” - Melissa Milroy
Perhaps that’s why The Gardens Mall is welcoming electric car manufacturer Tesla’s showroom and a major Apple Store expansion—both rolling out by the end of this year. At 8,300 square feet, Apple’s new footprint will be the mall’s biggest store. Mall owner Nathan Forbes says The Gardens Mall supports these kinds of modern, service-oriented approaches to retail. “We work closely with our retail partners to support the in-store experiences that they must provide in order for them to be successful in this next generation of retail,” he explains.
Retail’s reinvention has promise, so long as shoppers keep shopping. With a 3.8 percent increase in consumer spending in 2016 coming on the heels of a 3.5 percent rise in 2015, that appears to be the case. Even better news? A new study from management consulting firm A.T. Kearney shows that 90 percent of shoppers prefer to buy in a brick-and-mortar store—and those results are uniform across demographics and age groups.
“They love going out, shopping with people and touching stuff,” says Michael Moriarty, a partner in A.T. Kearney’s retail division. “Everybody likes going shopping.”
Although shoppers seek different things in today’s wired world, we still like to ogle new goods in person. Our love of one-click shopping aside, we’re suckers for the instant gratification of an in-store purchase. And there’s no better place to do it than in an American mall. “Consumers still enjoy the entertainment found in brick-and-mortar,” Forbes says. “We work every day to provide a beautiful environment for our guests—to dine, to shop and simply enjoy being here.”
-- Fort Lauderdale’s Sunrise Center is constructed as the area’s premier outdoor shopping center.
-- Southdale Center, America’s first enclosed mall, opens in Edina, Minnesota
-- Strip malls are introduced to accommodate growing suburban development nationwide
-- West Palm Beach’s Palm Beach Mall opens
-- The number of U.S. shopping malls doubles
-- The Boca Raton Mall opens
-- The first mega mall is developed
-- Warehouse clubs are launched
-- Food courts are introduced
-- The Sunrise Center in Fort Lauderdale is demolished to make way for The Galleria Mall
-- The Town Center at Boca Raton opens
-- Treasure Coast Square Mall opens
-- The Gardens Mall in Palm Beach Gardens opens
-- The Boca Raton Mall is demolished
-- Malls reach peak popularity
-- Number of retail outlets grow
-- First secure online purchases are available
-- Boca’s Mizner Park opens
-- Indian River Mall opens
-- West Palm Beach’s CityPlace opens
-- The Mall at Wellington Green opens
-- The last new enclosed mall is built
Source: Adapted from Fung Global Retail & Technology’s Mall History Timeline