Anchors Away...

by Stevie Zvereva

Adaptation, evolution and the reimagining of empty retail space

They call it a “ghostbox.” Just off War Memorial Drive in Peoria, the Macy’s signs are gone, the sun-struck label scars fading from the building like handstamps from a fun night out. After the company’s January announcement to close 40 of its stores in the name of operational consolidation, the anchor position at Northwoods Mall went dark this spring, following weeks of final clearance sales.

It’s a two-part loss, says Jeff Griffin, President and CEO of the Peoria Area Chamber of Commerce and CEO Council. “Losing an icon like that is emotionally devastating, and there’s also a financial impact.” Like the 62 sales associate positions that vanished with the store’s closing. “But Peoria is certainly not unique in losing Macy’s,” he adds—nor is the company the first to cry Mayday! in recent months.

Shutter to Think
Earlier this year, retail giant Walmart announced the closing of 154 U.S. stores, affecting some 10,000 employees. After reporting a 20-percent drop in fourth-quarter profits in February, Kohl’s plans to close 18 stores and lay off more than 1,500 employees. In April, Sears Holdings Corp. announced that 78 additional Sears and Kmart stores would close by July, including the Pekin location (this following a previous round of closings, which axed the Morton and Canton sites). Office Depot announced it will shutter 50 more stores by the end of the year. Sports Authority, 140. Aéropostale, 113. And the list goes on.

Shopping malls are not immune to the epidemic. More than two dozen enclosed malls have closed since 2010, while 75 more are near failure, reports Green Street Advisors. Of the roughly 1,200 enclosed malls left in the U.S., only 80 percent are considered “healthy,” and nearly 15 percent of them are 10 to 40 percent vacant, according to The New York Times.

Of course, retail real estate is fluid by nature. It’s said that there are three factors likely to ensure retailing success: location, location and location. It’s a simple concept: the best site will attract the most shoppers. But what happens when that location is online? According to CMO.com by Adobe, online retail sales will hit $370 billion next year, up from $231 billion in 2012. Their recent study shows nearly eight in 10 millennials research their options online before ever stepping foot in a physical store. Citing this study, Griffin laughs. “Honestly, I thought that number was kind of low!” he says. And when they do find themselves in a store, most surveyed consumers ages 25 to 34 say they use their smartphones to compare prices, read reviews or engage with brands on social media.

For retailers with an online presence, store closings might simply represent a shift in focus, dictated by the desire of consumers to shop more conveniently, with greater choices, for the best deals. And while some might cry over the cultural casualties of the traditional shopping mall’s demise—mall rats, flocks of giggling middle-schoolers, window shopping, one-stop-shop brand-name loyalty—are our lives really any lesser without?

Rise and Fall
The original indoor-mall prototype stemmed from designs by Viennese emigrant Victor Gruen, architect of Southdale Mall in Edina, Minnesota, the nation’s first indoor mall. Before it opened with three anchors in 1956, “malls operated much like traditional store-lined streets, with their entrances facing outward along a single story,” reports Smithsonian Magazine. “In Southdale, Gruen invented the idea of a two-story, air-conditioned, inward-facing mall, rooted at its center by a light-filled square replete with fountains, sculpted trees and a fishpond.”

Gruen’s concept spread like lightning at the frenetic pace of suburban sprawl, fueled by post-war consumer optimism, simplified and expanded credit options, and consumers’ thirst for status. Northwoods Mall, which opened in Peoria in 1972, exemplified the new indoor mall, its layout built around a trio of anchors to entice patrons to “shop ‘til they drop.” But along the way of national trends, Northwoods’ success relegated Peoria’s Central Business District to a sleepy status. By the ‘80s, most downtown retailers had moved their businesses northward, or closed up shop entirely. Today, the city’s renewed focus on boosting the Riverfront and Warehouse District is no coincidence; the wounds drawn by sprawl still remain.

By the late ‘90s, the anchor-store recipe of wide-open, air-conditioned spaces had grown stale—a decades-long shift that developers are still grappling with. The last enclosed mall in America was built a decade ago. “The experience that people want with shopping has changed,” Griffin says. “The traditional malls that went up in the ‘70s are not people’s choice anymore.

Eat, Play, Shop Local
“I don’t want to sound cynical,” he stresses, “but I don’t think there’s ever been a change like this in the last century. If we don’t figure out how the local economy can participate in revenue generation from taxes… it will be devastating.” And right now, there’s a major disconnect, Griffin explains. If we can all buy things cheaper and easier (and often with free shipping) online… why wouldn’t we? For him, the answer is obvious.

“If you buy something on Amazon, none of those tax dollars come through the city,” he notes, “and I don’t think most consumers are thinking about that.” In a recent report on the fiscal and land-use impacts of online retail, the strategic planning firm Civic Economics found that in 2014, Amazon sold $44.1 billion of retail goods nationwide—while avoiding $625 million in state and local sales taxes. According to researchers, that’s the equivalent of 30,000 retail storefronts—or 107 million square feet of commercial space—which might have paid $420 million in property taxes. In other terms, even counting all the jobs in Amazon distribution centers, Amazon sales produced a net loss of 135,973 retail jobs across the country. Of the 50 states, Illinois ranks third in total tax loss to Amazon sales, at $59.77 million.

To raise awareness of the problem, the City of Peoria and Peoria County have launched the Live & Shop Peoria County campaign in recent years. Through selfie contests and friendly competition among businesses, the program stresses one major reason to shop local: it keeps four times the amount of money in the local economy, compared to shopping at chains. The Peoria Area Chamber of Commerce is also leading the charge to make sure Peoria businesses stay abreast of the changing tide, ever-growing and adapting.

“We believe in that concept and urge people to shop locally,” Griffin says. “But at the same time, we have to make sure our businesses are present out on the Internet, that they have the apps they need and the reward programs they need to remain competitive.”

Brad Joseph, Realtor at Joseph & Camper Commercial Real Estate in Peoria, doesn’t mince words. “Amazon has crushed everyone,” he declares. Because of that, retailers are being forced to change, and change fast. “[Peoria retailers] are becoming smarter… and they’re a little more cautious in how they do business. Retailers are getting smaller and ‘sharpening their pencils’ in how they negotiate deals or make new deals.

“And I really don’t think malls are going away,” he clarifies. “They’re just having to change the way they attract people.” After all, out of anguish, creativity is born.

The Omni-Channel Adaptation
Northwoods Mall, for one, has already begun the change, says Joseph, who is brokering the vacant Macy’s space. The adaptation? Making sure there’s more to do inside. A two-story bungee-jump trampoline. Santa Claus. The Easter Bunny. 6:30am openings for walkers. Kiddie car rides. A hurricane simulation machine. “They weren’t forced to do that kind of thing 20 years ago because the mall was the main attraction,” he adds.

“We like to do entertainment, but we also do a lot of community events—things that make this more of a community place to shop,” says Bob Schertz, Director of Marketing and Business Development at Northwoods Mall. “It can’t be just retail,” he adds.

This fall, Northwoods will host a large fundraiser for the Kiwanis Club of Peoria, and it's partnering with the new Louisville Slugger Sports Complex to attract large groups of visiting players and parents. The mall and its management group, WP Glimcher, also hope to get their first large “Community Day” off the ground in September, opening the doors for nonprofit groups to come in and raise money for their organizations. “We want to be part of the community… so we have to be a little bit of everything for everybody,” says Schertz.

A more extensive reinvention is materializing in malls across the country, as empty storefronts are converted into mixed-format spaces featuring accommodations, groceries, office space, movie theaters, bowling alleys, restaurants, community centers and green space. With its expanded indoor-outdoor promenade, a recent renovation of Westfield Galleria at Roseville near Sacramento increased foot traffic by a remarkable 46 percent. In the Boston suburbs, Chestnut Hill Shopping Center converted its shuttered Macy’s site and other vacant spaces into an open-air retail and dining venue, with a movie theater, fitness center and office space in a village-like arrangement. Highland Mall in Austin, Texas was purchased by the neighboring community college, which converted a JCPenney ghostbox into a huge learning emporium with instructional spaces, a library and offices. In Michigan, the empty Grand Village Mall was donated to a church; the community now gathers in a former anchor store for worship.

At its best, the new “omni-channel retailing” represents a positive reimagining of old space to serve a population with different needs than the prior generation. But there are significant hurdles to this kind of redevelopment, Joseph explains. “When mall-lease terms like those at Northwoods were set 40 years ago, they didn’t account for alternative uses.” Each anchor, for instance, owns its own parcel, and the process to update the restrictions on any individual property requires the approval of not just Macy’s, but Sears and JCPenney as well. And that’s not to mention the tremendous cost of renovation.

Allowing an anchor box to sit dark for too long, however, can be harmful to the community. “The anchors are what bring people in,” Joseph notes. Undoubtedly, the Macy’s closing has reduced foot traffic at Northwoods, which could lead to a perception of the mall as declining. But he’s not overly concerned; within four weeks of its closing, he received two offers on the property.

“Normally, these big boxes take time,” he says. While the offers and prospective timelines have not yet been disclosed, Joseph is optimistic. “I’ve been pretty happy with the activity we’ve had,” he says.

“Every store we have here is important to us,” says Schertz. “But the fact that Macy’s is gone is just going to be another evolution of the mall. The store will be replaced, and it will be replaced by a better tenant, because we’re out there looking and negotiating with people that will be a great complement to the mall and to the area.”

A Breath of Fresh Air
Further north, Cullinan Properties’ 200-acre Grand Prairie Developments may well represent the future of retail. Opened in 2003, The Shoppes at Grand Prairie’s open-air, lifestyle format embraces a mixed-use approach. Open-air markets are often anchored by large grocery stores, and Grand Prairie’s Hy-Vee anchor opened with eager anticipation last year. While The Shoppes is now operated by DMA Properties, Cullinan continues to develop in and around the site, in addition to its similar, mixed-use centers in The Levee District in East Peoria, The Streets of St. Charles in St. Charles, Missouri, and Burleson Commons near Fort Worth, Texas.

Elsewhere in Peoria, other developments appear to be following the grocery-anchor formula. For a year and a half, the Kmart ghostbox at Evergreen Square has lurked like a bad pun between pop-up Halloween shops in a shopping center that’s seen better days. But it’s just a quiet front, says John Elliott, Public Affairs Manager for Kroger. "It's a lot like building a house. There are times when you can see the progress, and times when there's work happening, but it's not visible." In fact, the deserted space is on track to become a new Kroger Marketplace, with “a larger, traditional marketplace venue and more of a dine-in restaurant appeal,” he adds. “As we've been remodeling stores, we've been investing in more of a 'restaurant-feel' store.”

In addition to fresh food, the new Kroger model is a one-stop shop, complete with home fashion, décor, bed and bath, kitchen and small appliances, home office and toy sections. You might liken it to a Target or Walmart. The store will be a welcome addition to the plaza—the anchor it needs in order to breathe again—but when it opens, the current Kroger site across the parking lot will close. “We’re not sure yet what will happen to that location,” Elliot notes.

Meanwhile, a few miles north, Junction City has been expanding to realize a similar concept, with outdoor venues offering more than mere shopping. “There’s stuff to do,” Griffin explains. “Maybe the husband wants to sit and have a beer, and the wife wants to shop for shoes; then he gets a haircut, and they do all this stuff...

“People like to do business with someone they know, and I think there’s always going to be a market for that,” he adds, detailing the growth of niche-market brick-and-mortars. Shops like Bushwhacker and Running Central, he suggests, are prime examples of independent retailers thriving on this new model. “Those are the stores where people still want to go, to feel the product and interact with the person. But now, there’s also an experience behind the shopping.”

Internet Killed the Mall Rat
In a 1985 study, one University of Illinois researcher scrutinized teenagers in a mall like rats in a lab. “For the teenage population, hanging around the mall is less a way to spend money than it is a way of passing time,” he wrote. “Many seem to take pride in their use of the mall, viewing it as what environmental psychologists call a ‘secondary territory,’ or a ‘third place’—a respite from the treadmill between home and school, a place for enjoying social life.” The study reads like an old snapshot made clearer with distance, romanticized yet antiquated.

“The old-fashioned enclosed mall exists more powerfully now as a symbol of tasteless consumerism, ugly architecture and bland corporate hegemony, revealing our recent past as unsophisticated suburban rubes”—or so says one online columnist. But it was also a social venue of the non-virtual sort: a physical place to go with real people. And while the Internet has easily filled that void, the larger social effects remain pending.

Maybe the reality of mall culture is best manifest in Mall Madness, the late-‘80s Milton Bradley board game. A quasi-Monopoly take on spending and sales, it taught important lessons to adolescents, like how to buy more through clearances. The first player to purchase all six items on their list and reach the arcade or parking lot won. The game screams American materialism at its worst, but there’s something about the nostalgia that warrants hanging onto. Today, unopened copies of the game are going for upwards of $200 on eBay. An insider tip: Amazon’s got it for $89.95—shipping free with Prime. iBi

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