Even as cash-strapped national and anchor tenants exit regional malls, sales at The Citadel mall – challenged by Macy’s and Steve & Barry’s recent closures – remain remarkably consistent.
During its 37-year history, the 1.1 million square foot retail hub on 47.7 acres has catered to about 500,000 shoppers annually, and so far those numbers are holding, said Victoria Harley, senior property manager of Midwest Mall Properties.
That’s pretty good news in view of national retail trends.
The Citadel, home to more than 160 shops and restaurants during 2007 when then-owner Macerich sold the property to Little Rock-based MMP, has seen “significant” attrition and increased vacancies Harley said. Today that number is closer to 130.
As a result, the mall’s owners – a group of investors including John Flake, a co-founder of Flake & Kelley Commercial Real Estate based in Little Rock – have been forced to look at new marketing and tenant retention strategies.
The Citadel’s owners are not alone. The International Times – published by The New York Times – reported earlier this month that, “As more stores have closed, mall vacancies have been at their highest point in almost a decade, according to Reis, a research company, which said the vacancy rate at the end of 2008 was 7.1 percent, compared with 5.8 percent at the end of 2007. Other analysts have slightly lower figures, but all agree that vacancies are rising.”
The “brutal environment means new opportunities,” the report said, noting that major discounters like dollar stores and Big Lots are suddenly welcomed with open arms by regional malls. Prior to mid-2008, most would not have been actively courted in favor of national credit tenants – a term coined by commercial brokers to denote a strong profit/loss statement – or more prestigious retailers.
But all that has changed.
Today’s regional mall owners are looking for creative tourniquets to stop the bleeding and are taking steps such as offering rent incentives in lieu of early termination clauses or helping tenants downsize-in-place if necessary.
In the Pikes Peak region, The Citadel’s owners are not sitting idly by. MMP has listed its vacant spaces with a local commercial real estate company, Cornerstone Real Estate, owned by broker Scott Gray.
The results, so far, have been “very promising,” Harley said crediting the proximity of Fort Carson and Peterson Air Force Base for the regional mall’s brisk sales through February and March.
“I don’t have exact revenue numbers for February from all the merchants yet, but I do know we were up compared to the same month last year,” she said, guessing that revenue was up about 5 percent to 10 percent for both February and March compared to the same months last year.
Building on strength
Any speculation that the mall’s vitality has been sapped is “absolutely not true,” said Gray, who competed with dozens of other brokers – local, Denver-based and national – to win the mall’s listing. “In fact, it’s just the opposite. The Citadel is still one of the strongest retail centers in the city.”
He said that the mall’s south-central location at the intersection of Platte Avenue and Academy Boulevard has enabled many of its tenants not only to flourish, but to lead their regional divisions for store sales.
“Look at Burlington Coat Factory at The Citadel. They’re the No. 1 store in Colorado Springs and No. 2 in their Colorado-Utah-Idaho region. Only the Aurora store ranks higher. They blow away their in-town competition,” he said. “This Dillard’s ranks No. 1 both in their district and in their four-state region – and the J.C. Penney’s is the No. 1 store in the city, second in the region – only behind Northglenn.”
Other stores that continue to perform well, according to Gray, include Fanzz with sales up more than 17 percent compared to February 2008; GNC, the No. 1 store in its region among 32 stores; Claire’s, up 10 percent for February and March, and among the top 10 percent of stores nationally based on revenue; and the hip younger shoppers’ Aeropostale, which ranks No. 1 among 64 stores in four states through February.
In addition, Spencers, Buckle, Spring
AT&T, Finish Line, Champs (up 40 percent during February compared to the prior year), Pet City, Kay Jewelers and Weisfield Jewelers, all have seen year-over-year sales increases during February and March.
So what about the larger empty spaces? How does a regional mall supplant a large department store or 40,000-square foot Steve & Barry’s?
In the current economy, few chains need spaces as large as the ones coming onto the market.
Gray admits re-tenanting will take “thinking outside the box.” He points to owners throughout the country who are using creativity to fill empty anchor spaces by bringing in grocery stores, medical facilities, dance studios and even community or technical colleges.
Another trend: entertainment centers.
At The Citadel, for example, Glow Golf has leased space formerly occupied by Old Navy, and the neon-black-lit miniature golf course is doing pretty well, according to Harley.
Like her counterparts across the country, she has seen spaces once dedicated to apparel or body lotions transformed into inside gaming centers, bowling alleys or even indoor beaches, featuring wave-making machines called “Flowriders” for would-be surfers.
Gray would rather re-tenant with the help of more traditional, higher-rent retailers, however. Both the Steve & Barry’s and the Macy’s spaces will have to be divided into smaller units.
Some big- and mid-box retailers with stores in lower-traffic strip centers are already circling.
Shoe Carnival in Rustic Hills, for example, was ready to leave the market, but after talking with Gray about part of the Macy’s space, it’s reconsidering.
And they’re not the only ones.
Outside brokers ‘promising’
Opening The Citadel to outside brokers rather than relying strictly on an in-house representative appears to be working.
“We’ve had calls from a broker representing a movie theater chain, national tenants and untraditional retail tenants – and we’re working this listing hard,” Gray said. “We want retail brokers to participate – I’ve been talking to Regency, Sullivan Hayes and Crosby in Denver as well as to Rich Walker at First Properties and Mark Useman at Sierra (Commercial Real Estate). They represent companies like Shoe Show, Hollywood Theaters, Target and Ross.”
Harley acknowledged that, so far, no new leases have been signed, but she said prospect activity is at a higher level than in the past.
“Scott’s group has taken the time to learn about the mall, the tenants – and asks how their sales are going,” she said. “He’s getting educated. Given that, it’s very promising. We had another in-house leasing agent – but he was out of state. A local company is so much more aware of this city – and understands what’s going to work.”