What’s wrong with the regional mall…and what’s right?

Today’s Retail Wire discussion quotes mall developer David Simon, who expresses optimism on the lfuture of his business. I take a different position: The long-term prognosis for the enclosed regional mall is mixed. Malls face at least a couple of distinct challenges:

1. The mall anchor tenant base is in jeopardy. There is only one national “traditional department store” (Macys), with JCPenney having a different value positioning and Sears having its own issues. Many malls are anchored by regional department stores in various degrees of difficulty, and the market share of traditional department stores has been declining for years. So the biggest “draw” to the regional mall simply isn’t a great traffic driver any more.

2. Real estate overdevelopment has led to a situation where weaker malls and stronger malls are within a few miles of each other, in healthier communities. At the same time, many older malls have suffered from flight to outer-ring suburbs for many years. I visited Northbrook Court and Old Orchard, about 10 minutes apart in north suburban Chicago over the weekend, and all the customers were at Old Orchard.

These are only two issues confronting the regional mall. What are some of the solutions? There’s a long list, but I would point to the tenant base, to ensure that the anchor mix includes big-box stores and value-oriented retailers where appropriate. (Don’t let all the traffic and frequency flee to the power centers!) I would also make sure that the tenant mix is kept current, including a variety of eating venues to help keep consumers at the mall longer.

Mr. Simon has reason to be optimistic, and not just because he is in the mall business…but not without some serious reinvention of a 50-year-old concept.

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