By Suzanne Kapner
On a bright August morning, GGP Inc., one of the country's
largest mall operators, did the unthinkable. It broke ground on a
new shopping mall, a seemingly risky bet in a world where retailers
are closing hundreds of stores and malls across the country are
trying to reinvent themselves.It could be one of the last enclosed
malls ever built in the U.S.
"We're not building any more," said GGP Chief Executive Sandeep
Mathrani. "This could be it for a long period of time."
Other real-estate developers, landlords and analysts agree. "No
one is building enclosed regional malls today," said Stephen
Lebovitz, chief executive of mall owner CBL & Associates
Properties Inc. "All the development is redevelopment of existing
centers."
With the SoNo Collection, as the new mall will be called when it
opens in 2019, GGP saw an opening to fill what it deemed an
underserved area in Norwalk, Conn., about 50 miles north of New
York City.
The $525 million project, which the mall operator began planning
in 2013, will be anchored by Nordstrom and Bloomingdale's and house
80 to 100 smaller stores, including as many as 10 restaurants and
potentially a health club. One change from malls of the past: there
will be far fewer apparel retailers. GGP has pre-leased about 60%
of the available space.
"There are very few markets in America that have holes," said
Mr. Mathrani, whose company owns 126 retail properties.
Norwalk is part of Connecticut's Gold Coast, so named for the
affluent towns along the Long Island sound. A third of the
households within a 15-mile radius of the project have a net worth
of $500,000 or more, according to ESRI, a geographic mapping
company.
The new mall could be bad news for other nearby centers. DJ
Busch, an analyst with real-estate research firm Green Street
Advisors, expects the SoNo to pull shoppers from malls in Stamford,
Danbury and Trumbull, all of which are located in the same
Fairfield County.
"It's not like the area is aching for new retail," he said.
Mr. Mathrani said the SoNo will have higher quality stores than
those malls. He expects the new mall's sales to reach $800 a square
foot, which would put it among the top performing malls in the
country.
"It will have some impact on our mall as it will on everything
in the market," said William Taubman, the chief operating officer
of Taubman Centers Inc., which owns the Stamford Town Center.
But he added that the SoNo's real competition will be the tony
shopping districts of Westport and Greenwich, which include a Saks
Fifth Avenue department store and specialty retailers such as Vince
and Theory.
A spokeswoman for Macerich Co., which owns the Danbury Fair
Mall, said its trade area has minimal overlap with the SoNo. A
spokeswoman for Westfield Corp., owner of the Trumbull mall,
declined to comment.
U.S. mall development peaked in the 1970s and has steadily
declined. Just six large malls were built between 2006 and 2015,
compared with 54 during the previous decade, according to Green
Street.
Mr. Mathrani said the death of shopping malls has been
exaggerated. GGP has leased nearly 10 million square feet so far
this year, up from 9.5 million for all of 2016. But he concedes
there is a wide variance between the top-rated malls and weaker
properties. For instance, foot traffic rose 1.4% at GGP's high-end
A malls for the first six months of the year, but was flat at its
midtier B malls.
Rather than building new centers, mall owners are spending to
redevelop existing properties, often by replacing aging or troubled
chains such as Sears Holdings Corp. and Macy's Inc. with discount
stores, movie theaters and grocers that are better drivers of foot
traffic.
One exception is the American Dream Meadowlands project in N.
J., which is under construction and expected to be completed in
2019. But with more than half its space leased to entertainment,
including a DreamWorks water park and a Nickelodeon theme park, it
goes out of its way not to call itself a mall.
GGP is also upending the standard formula. Only about 30% of the
SoNo mall will contain retail chains, reflecting a shift in shopper
spending away from clothing toward beauty, health and fitness and
entertainment.
The developer had to make other adjustments as well. It
abandoned a proposed hotel and it changed the definition of
"anchor" to give it the option at some time in the future to
replace Nordstrom and Bloomingdale's with tenants such as a
supermarket or sporting goods chain.
Some residents are less than thrilled about the prospect of a
new mall in their neighborhood.
"Everywhere you look it seems that retail is struggling," said
Margaret Kozlark, a 52-year-old who lives in Norwalk. "I'm the
target shopper and I don't go to malls anymore."
City officials also had some reservations, but they were won
over by the promise of tax revenue and the creation of 2,500 jobs,
which would make the SoNo mall Norwalk's largest employer, beating
out an operator of local hospitals.
"There was concern about building a mall," said Bruce Kimmel, a
Norwalk city council member, "but we went through the demographic
data and decided it was worth it."
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
October 24, 2017 07:14 ET (11:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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