With brick-and-mortar retailers closing hundreds of stores, the future of the mall has looked bleak. But some say tales of its impending death have been exaggerated.
And according to a report in The Wall Street Journal, immersive destinations that give consumers an experience they can’t get anywhere else could be just the thing to save the retail spaces.
“Mall tenancy has changed,” said Alexander Goldfarb, a senior REIT analyst at the investment bank Sandler O’Neill + Partners. “What hasn’t changed is the human desire to socialize.”
Last month, it was reported that the vacancy rate at malls around the country hit 8.6 percent in the second quarter, marking the highest level since back in 2012, when the U.S. was crawling out of the last recession. Bon Ton Stores, Sears and JCPenney are just a few of the retailers that have been closing down stores and reducing their physical footprint.
As a result, malls are leasing space to offices, churches and gyms to lure foot traffic. In addition, co-working sites are predicted to grow at retail properties at a rate of 25 percent through 2023, and are expected to account for around 3.4 million square feet of retail space in the next five years.
And now some developers, retailers and entertainment producers believe that immersive destinations could potentially fill millions of square feet of empty retail space.
“There’s a ripe opportunity for this thing to go big and change the future of retail,” said John Feins, vice president of communications at Meow Wolf, a Santa Fe, New Mexico-based company that creates immersive art installations. It is leasing 50,000 square feet at AREA15, a 200,000-square-foot “immersive bazaar” of restaurants, shops and event space set to open in October 2019.
And Two Bit Circus, a futuristic “micro amusement park” set to open next month in Los Angeles, has raised $21 million from investors including Intel and CJ CGV, the Korean movie-theater company. Two Bit Circus is in discussions “with all of the biggest mall developers in the U.S.” to lease space for future locations, said Co-founder Brent Bushnell.
“There’s a huge appetite — particularly [among] millennials, but really everybody — for new stuff to do in public,” he said.
But Mikey Vu, a retail consultant with Bain & Co., cautions it’s not a certainty that these destinations can actually pull in a profit, adding that while they might work well in big cities, they could be a harder sell in smaller locations.
“The business model hasn’t been proven out,” he said. “I don’t think anybody knows how to do it extremely efficiently to generate profit margins.”