
Mall landlords struggling to find takers at a price they’ll accept - petethomas
https://www.bloomberg.com/news/articles/2018-06-12/owners-of-fading-malls-on-their-knees-as-buyer-pool-evaporates
======
projectramo
I remember learning that in the 90s some companies had this useless asset: gas
pipelines that spanned the country, but had dried up and were not being used.

Other companies had a problem: how to acquire the rights to lay fiber from one
end of the country to the other.

Some very smart person realized you could lay the fiber in the old pipes.

Question: what can be done with all that retail space? Is there a new use of
space that will come up?

Related question: what are the properties of malls that we might use?
(parking, close to residences, easy to walk through)

~~~
codingdave
It could be a whole new flavor for YC or other incubators - don't come to SF
and fight to find housing... come to the new Coding Mall - offices are in the
East Wing, apartment in the West Wing, demos and sales kiosks in the former
Sears, VC offices in the former JC Penney, and everyone meets up in the food
court (which is still running, btw, to keep everyone fed) for informal
discussions.

~~~
badgers
I'm not sure I'd want to live in an old mall, but I could see them being
purposed for office space. Parking is already taken care of, and most have bus
routes already in place. The existing food court would be ready for new
tenants. Other types of tenants could fill where other retail (e.g. clothing,
toys) once occupied, such as a gym/fitness company, FedEx/UPS offices, office
supply stores, etc.

~~~
seanp2k2
Yep, never understood why they don’t convert malls into office spaces. Then
again, in the Bay Area (at least South Bay) there are TONS of empty office
buildings for rent. I’m guessing that they all just want too much. Maybe it’s
a zoning thing with the malls? Seems like they could do it with the one in
Cupertino. For being Silicon Valley, sometimes this place really fails to
impress with innovations like that. Instead, we have scooter startups.

~~~
Figs
Sometimes malls _are_ converted to office space. According to the documentary,
Making of Riven, Cyan repurposed a strip mall as office space while they were
waiting for the construction of a real office. They originally started out in
some guy's garage after finishing Myst and crammed 12 people in there, then
moved into the strip mall -- which they said was "like heaven" by comparison,
but they didn't just stay in the strip mall because it was still too small for
all the staff they wanted to bring on.

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bcrescimanno
Here's an anecdote about my experience at a mall yesterday. I needed some new
shoes:

I went to the Skechers store. There were 4 people working. Not a single one
ever offered to help me. I had to walk up to the counter and the girl looked
shocked when I asked her to get me my size to try on. She handed me the box
and walked away. I never saw her again and walked out without making a
purchase.

I went over to Macy's to the men's shoe section. The section was about 5x the
size of the Skechers store. There was one person working who was busy with a
customer at the checkout. After waiting for 10+ minutes with no one to help, I
left without ever trying on a pair of shoes.

Then I went to Ecco--they are a small shop with only a small number of shoes.
While the salesperson was quite attentive and helped me out, the one pair of
shoes they had in the store that were interesting to me didn't fit right so I
left.

Tried to go to one more store only to discover that this particular location
only carried women's shoes.

All told, this adventure had me in the mall for about 90 minutes and I had
managed to try on 2 pairs of shoes. Throw in the drive and it was over 2 hours
for nothing.

I went home, spent 20 minutes on Amazon Wardrobe, and I have 8 pairs of shoes
in my size arriving at my house in a few days to try on.

Stores in a mall have a real opportunity to win on personal service and
instant gratification. Hire someone to help me find shoes that fit me well and
go with my own sense of style and who makes sure I go home happy. But if my
choices are spend over 2 hours for nothing or go online, I'm choosing the
latter every time.

~~~
mdorazio
To play devil's advocate here...

1) Are you incapable of finding the right size shoes yourself? The boxes are
usually laid out fairly logically and it's pretty rare for there to actually
be anything of use "in the back".

2) Hiring people to provide the level of service you're asking for would
significantly increase the cost of labor over the minimum wage kids that
usually staff these stores. I'm fairly certain the cost increase would
guarantee the store goes out of business with the razor thin margins they
usually have. Put another way, do you really think paying 50% more for higher
quality employees would guarantee 50% more sales revenue?

A big reason online shopping wins is because no one has the expectation that
an actual human will help them purchase things, and the labor and rent costs
are tiny in comparison to retail.

~~~
user5994461
I don't know what kind of stores you are used to but there is usually only one
shoe on display. All the pairs are kept in the back of the store, you cannot
try anything without help from the salesperson.

~~~
NikolaeVarius
I'm not much of a shoe person, but I have literally never been to or heard of
a place like this.

Including places like Modells, Macy's, Payless, Sports Authority, etc etc etc

~~~
cesarb
Perhaps it's a cultural difference? Every shoe store I've been to in my whole
life is like the parent poster mentioned: there's one pair of each model on
display behind glass, and the salesperson goes to the back to get the boxes in
your size.

~~~
csixty4
Definitely a cultural difference, and I'm intrigued about this approach. I
used to work the shoe department at K-Mart and spent most of my time cleaning
up after people who tried shoes on and just left them in the middle of the
aisle, or trashed the boxes getting them open (how???), or tossed their old
shoes in the box and walked out wearing a brand new pair.

Maybe not as consumer-friendly as what I'm used to, but it sounds heavenly
from the employee standpoint.

------
niftich
Malls were always predicated on the assumption that well-to-do suburbanites,
increasing in wealth and in number due to relative prosperity in the upper
subdivisions of salaried workers, would spend their disposable incomes on
getting boutique, brand-signalling merchandise for themselves and their
children.

This was a trend that was evidently worth commercially exploiting at a time
when malls were being built, but by the 1990s the demand for brand-name goods
climbed upmarket enough that a new distinction had to be drawn between a
mainstream mall and an upscale mall for this strategy to remain effective. New
malls were built at great cost, and they took the most desirable stores,
leaving the older wave of malls struggling for enough business to pay for
renovations, maintenance, debt, and ROI. This cycle repeated at least one
other time, when the outdoor, disassembled 'lifestyle center' became the
dominant design pattern in the mid-2000s, by which point the narrative that
malls are "dying" had become widespread.

Rather, the market has segmented to a degree that the concept is only
profitable at the highest end, while lower offerings are proving uncompetitive
with other forces in the economy, like powerful mainstream retailers with
lasting appeal (e.g. Target), low-price leaders (e.g. Walmart), reliable
stores with strong curation (e.g. Costco), and the convenience of ordering
online (e.g. Amazon). Then, it's worth noting that the generation that's 18-35
now spends less of their income on clothes than the generation that was 18-35
when malls were big [1], and apparel stores are about half of a typical mall's
occupancy.

Compare all this to Europe and UAE. Malls are doing great there. What's
different? Just about everything, from the concentration of population and the
particulars of siting that draws a higher proportion of people, to the value-
add of having such a variety of shops under one roof, to less competition from
non-mall retailers, and brand signalling still being a desirable goal.

[1]
[https://news.ycombinator.com/item?id=16322720](https://news.ycombinator.com/item?id=16322720)

~~~
tonyedgecombe
_Compare all this to Europe and UAE._

No, retailers are struggling in the UK at the moment, there have been a number
of high profile closures and restructurings. We haven't got the same capacity
problems of the US but shopping habits are definitely changing.

------
pascalxus
Malls, yuck! I find little attractive about them, and I'm not surprised no
one's going any more. malls are dying because they're all based on materialist
consumerism: something millennials want no part of.

Here's my suggestion. Fill them with Libraries, Gyms, yoga centers, Cafes,
Restaurants, movie theaters, science museums, bike repair shops, ceramic hobby
shops and indoor swimming pools, theaters and historic museums. That would get
me going back in a heartbeat!

And for crying out loud, put those massive cement filled parking spaces
underground. Replace all that extra space with Green trees, bushes, parks,
bike lanes and outdoor gyms.

~~~
throwawayjava
_> they're all based on materialist consumerism... Libraries, Gyms, yoga
centers, Cafes, Restaurants, movie theaters, science museums, bike repair
shops, ceramic hobby shops and indoor swimming pools, theaters and historic
museums_

Aside from libraries and (some but certainly not all) museums, aren't all of
these examples of things that fit well within materialist consumerism?

I also prefer yoga studios, expensive coffee, fancy restaurants to specialty
knives, clothes shopping, shoe shopping, and food courts.

But those sorts of personal preferences are just matters of choosing what to
consume, which doesn't seem like a fundamental or important difference.

~~~
pascalxus
The things I mentioned are mainly about experiences. For example, with a 5$
cup of coffee you get a great third place to hang out in an inspiring
location, comfortable seat, stable table and wifi: it's not really about the
coffee (for me anyways).

~~~
throwawayjava
_> The things I mentioned are mainly about experiences_

I've become convinced that clothing and shoe shopping is also "mainly about
the experience" for many people.

I don't get it, and I'm happy to see enough others who don't get it so that
there's a critical mass of consumers for the business that provide the things
I enjoy to thrive. But I do believe it's a matter of preference (and perhaps
also of environmental/economic impact).

------
jdonaldson
It's hard to explain how important malls were to some of my younger
colleagues, or to folks who didn't grow up in some no-name midwestern suburb
like I did. Malls were temples and town squares. They were facebook. They were
the internet. Virtually all of your exposure to the "outside world" happened
there.

Malls were incredibly well built and thought through. They were the crown
jewel for many mid-size towns (perhaps next to sports stadiums). They boasted
large, secure, climate controlled areas, often in places that had dramatic
seasonal weather changes. They were a constant.

I think they represent a tremendous bargain, provided a good deal is struck,
and someone knows what to do with the space. However, the window for this to
happen is small. Spaces that are that large that fall into disrepair often are
unsalvageable.

~~~
nicoburns
I think this might be US-centric phenomena. While we have some Malls in the
UK, I believe most shops never really left the high-streets here (until the
rise of the internet).

~~~
sethhochberg
OP mentioned a "no-name midwestern suburb" \- in places like that, the main
shopping street in the town often never existed in the first place. The land
use goes straight from farms or ranch land to massive suburban housing
developments with no functional town having ever existed in between.

Thats not how all of the US works thankfully, but in huge parts of the country
which are still doing the suburban sprawl thing, its a pretty common pattern.
The nearest city which existed before the 1950s might be an hour's drive away,
everything is new and purpose-built by large scale commercial developers.

------
Spooky23
Declining retail is one factor, but bad balance sheets are the other.

This type of development is fueled by favorable up-front tax and accounting
treatments for development, but it requires constant growth for the companies
to survive. When you get to the back-end of the 30 year loans, you're paying
principal on a depreciated asset... the bag of tax tricks isn't enhancing
profit anymore.

The fact that the operators are desperate is a good thing -- they'll be
bankrupt soon and useful redevelopment of these massive properties can start
taking place.

------
learc83
When I was a kid in the 90s, I remember malls being much more of a destination
--they had big atriums with fountains and indoor trees.

By the early 2000s, when I was in high school, they were much more
utilitarian. This was way before online shopping was killing their profits.

I'm assuming it had something to do with consolidation and the new owners
trying to extract maximum short term profits.

~~~
Mithorium
I also distinctly remember enjoying going to the mall as a kid because of the
fountains and glass ceiling atrium, lots of seating spaces, is that not a
thing anymore?

~~~
master_ant
Portland's Clackamas Town Center used to have a beautiful skating rink, large
fountains next to escalators, and foliage. This has mostly been replaced with
a seating area, a larger food court, and more shops. It's considerably less
appealing to just _be_ in, at least for me. I miss stuff like that.

------
bsenftner
“It’s a tough environment. I don’t think anybody really anticipated the
decline of the department store to happen as quickly as it did,”

Yeah, right, all you ostriches ignoring the advance of online retail for the
last 15 years.

~~~
choward
It's happening a lot slower than I expected.

------
jonknee
Bloomberg had a fun little game a while back where you could play a mall owner
trying to keep your property profitable... Lovely retro experience, worth
checking out:

[https://www.bloomberg.com/features/american-mall-
game/](https://www.bloomberg.com/features/american-mall-game/)

------
honopu
Just turn them into community colleges, or satellite university locations. Put
up some apartments and offer the full experience. You have plenty of parking..
plenty of land.

~~~
futileboy
I would be a big fan of them converting the locations in to mixed use housing
and retail.

------
track02
I've been watching a lot of videos recently on visiting abandoned or dying
malls in America and was wondering if it could be possible to convert them
into residential/communal areas?

They could be almost self-contained; with housing, shops, entertainment, etc
all under one roof.

------
markaskey
Malls need to move from Everything to Everyone to targeted segments of the
consuming public.

My suggestion would be to rebuild the existing set of retail locations and
target a group or niche to drive more traffic. For Example: Focus on Moms with
kids from zero to 6. All the stores would cater to this group. You wouldn't
see Athletic Shoe Stores or Abercrombie but store like Baby Gap, Carters,
Gymboree or Children's Place. Add in Starbucks and a few other children
friendly restaurants. Put in one or two play spaces for kids. Offer Free
Babysitting if the Moms schedule appointments at a Yoga Center, Nail or Hair
Salon. Make it a destination for Mom's to One Stop Shop for all their needs
and a place where kids can play while they sit and watch or shop. Put in a
couple of Pediatricians, Eye Doctors and a few Kids focused Dental Services. A
Kids focused Movie Theatre and maybe even an aquatic center attached but for
young kids. Make the entire place a destination. "THE" go-to place in town to
shop for Moms with kids from infant to 6.

Or take an existing Mall and put in an indoor Skate Park. Fill it with stores
catered to 16 to 25 year olds. Set the expectation that you expect Youth to
"cruise" the locations. Add some security to make it safe and create a hangout
where they will shop.

------
markaskey
My suggestion would be to rebuild the existing set of retail locations and
target a group or niche to drive more traffice. For Example: Focus on Moms
with kids from zero to 6. All the stores would cater to this group. You
wouldn't see Athletic Shoe Stores or Abercrombies but store lke Baby Gap,
Carters, Gymboree or Childrens Place. Add in Starbucks and a few other
children friendly restaurants. Put in one or two play spaces for kids. Offer
Free Babysitting if the Moms schedule appointments at a Yoga Center, Nail or
Hair Salon. Make it a destination for Mom's to One Stop Shop for all their
needs and a place where kids can play while they sit and watch or shop. Put in
a couple of Pediatricians, Eye Doctors and a few Kids focused Dental Services.
A Kids focused Movie Theatre and maybe even an aquatic center attached but for
young kids. Make the entire place a desitination. "THE" go to place in town to
shop for Moms with kids from infant to 6.

------
tunap
Scottsdale AZ's Galleria struggled as a retail mall, tried other purposes and
then it went business park. Seems to be working, do not read headlines about
it being sold for pennies on the dollar anymore...

[http://galleriascottsdale.com/](http://galleriascottsdale.com/)

------
Sir_Cmpwn
I wonder if it makes sense to turn malls into office spaces. That'd keep the
food court busy, too.

~~~
fuball63
I was thinking the same thing. Co-working is on the rise, as are small rental
office units with shared assets. Maybe they could turn a mall into a
Googleplex for small business, with a game area, food court, pub/bar, gym,
grocery/drug stores. I think a creative person with good business sense could
pull it off.

------
duxup
There are several nice fancy style strip mall type places near me. All of them
reportedly have sky high rents and several are largely empty and have been for
years and all cycle through stores at a surprising rate. They keep up the
malls just fine as if they're occupied, but they're mostly empty.

It seems like such a waste to not have something operating in there.

------
notadoc
Maybe they can turn large vacant malls into housing for the vast homeless
populations found living in shantytowns and tent-cities throughout the west
coast?

------
frgtpsswrdlame
In the common conception of markets no seller has enough power to sit on their
laurels, they must sell their product in order to survive. It seems wrong to
me that in the real estate market liquidity would drop as prices drop. There
needs to be a cost associated with holding real estate so that there is
turnover in good times and bad times.

~~~
jessaustin
Owners of real estate already pay property taxes. Are you just proposing that
those be increased? And you think that will make real estate _more_ valuable?
I'm missing something here...

~~~
frgtpsswrdlame
>Are you just proposing that those be increased?

Sure, or an additional tax on unused or barely used real estate if we wanted
to be targeted, but really I like the broad property tax.

>And you think that will make real estate more valuable?

No, I'm not trying to make real estate more valuable, actually I'm trying to
make it less valuable by ensuring that the high levels of competition we see
in booming real estate times carries over to the busts. If the costs are so
low that people are just sitting on these properties and waiting for a magical
moment when prices rise then obviously costs need to be increased to pressure
these people to enter the market. Liquidity shouldn't drop when prices drop.

~~~
jessaustin
Increasing property tax in general is less bad than this "unused or barely
used" tax idea. That sounds like a good way to turn all old malls into flea
markets. That is, big messy places where anyone can sell anything she wants
out of the back of her van, for $5 a day. "Anything she wants" will include a
wide variety of items to which neighbors will object strenuously. In addition
to the unsavory sales activity, other unsavory activity will also take place.
There's no way any taxation scheme will pay for the required extra policing.

I won't be surprised if we _don 't_ see this happen...

------
polski-g
1) Do malls exist in Europe?

2) If yes, are they also failing?

------
NedIsakoff
Stupid ClickBait Headline:

"That’s proving difficult, with just a shallow pool of investors who are
willing to take on a declining mall and even fewer who would pay what the
landlords want."

How is that practically giving way?

You know what? I'll sell anything you can find in my garage for $2M USD.
Anything and all things. Is that pratically giving away?

~~~
excalibur
Depends on what's in your garage.

