Malls appear to be refocusing their tenant mix around hospitality, entertainment, and services, says John Lenihan.
This change is partly because traditional fashion tenants have expressed concerns about unsustainable rents and have also experienced declining performance within mall locations. Subsequently, they are shutting stores.
Baby boomers are the staple, but ageing mall customers.
They are not being replaced by younger generations who are instead shopping online, and spending more on hospitality and services, and also outside of malls.
The problem with hospitality and services for landlords is that they have lower turnover and can’t pay the big rents. A $10 spend on coffee and a muffin doesn’t match up to a $150 dress, so with stagnating visitation, rental growth cannot continue without serious change.
Kiwi Property and Scentre Group, which operate the major regional malls in New Zealand, seem to be tackling the problem by bringing in new brands and pushing existing tenants to expand across their malls.
But retailers are pushing back.
Premier Investments, which owns Smiggle, Peter Alexander, Just Jeans, Portmans, Jay Jays, Jacquie E, Dotti, and a big chunk of Myers, has threatened to close more mall stores if landlords don’t give them cheaper rents and capital incentives. It simply wants rents to reflect store performance and overall mall performance. It shut 80 existing stores in the last five years for this reason alone; this is despite it opening over 260 new stores, and having some very successful brands.
What seems key to both malls and retail stores is that an environment with a unique personality driven by design, research and innovation is key to attracting customers and driving sales growth. As the saying goes ‘you can’t keep putting lipstick on the pig’.
This story originally appeared on RCG.