The death of the American mall is near.
E-commerce is taking over the world. Your favorite mall will disappearand all that will be left is an automated retail industry withdrones dropping denim on your porch like a stork delivering a newborn.
At least, that's where many believe the industry is going.
The way people shop is changing. Malls are shutting doors. Anchor storechains are closingand many national retailers are filing for bankruptcy.
Yet, the economy isgrowing, unemployment is low andconsumers are buying more than ever.
In Christiana, with a booming, fully occupied megamall and a rapidly growing Fashion Center just off its campus, it would be hard to tell brick-and-mortar retail wasn't outpacing online retailers.
Aided by its tax-free shopping, proximity to I-95 and Del. 1providingeasy access from Pennsylvania, New Jersey, New York,Maryland and the Northeast corridor, Christiana is bucking national retail trends. All 179retailspacesin Christiana Mall are leased. And at the Fashion Center, 95 percent of space will be leased by year's end (the other 5 percent are still under construction).
Nationally, vacancy rates at regional malls are more than 8 percent, and strip malls have a 10 percent unoccupied rate.
There are 1,100 shopping malls in the country now, and most of them are struggling.Financial services company Credit Suisse said in a report last yearthat a quarter of them may close by 2022 as consumers make more purchases online and brick-and-mortar chains close.
Christiana won't be one of them.
Statista,an online statistics, market research and business intelligence portal, estimates there will be a 10.5 percent retail vacancy by the second quarter of 2019.
On a recent Saturday, traffic near Christiana Mall washeavy. The parking lot filled up like it was Black Friday. There were as many out-of-state license plates as Delaware plates.
Over at the Fashion Center, the 570,000-square-foot retail center thatopened its first phasein October 2015, there is still construction going on. Best Buy, outdoor retailer REI and other stores were busy. And modern, popular fast-casual eateries like Shake Shack, Zoës Kitchen, Qdoba and others saw steady business.
Back inside the mall, the food court, which features strong brands like Chick-fil-A, Chipotle, McDonald's and Saladworks, was so busy that finding a place to sit and eat meant waiting for someone to finish eating first.
A normal Saturday at the mall brings in somewhere in the neighborhood of 50,000 shoppers,though the mall doesn't provide exact numbers.
Kris Ciuffetelli, a 36-year-old Wilmington resident, said the mall is superior because of its store variety and restaurant options.
Ciuffetelli, whose motheronce worked at a smoothie shop at the mall, said he's been going to Christiana for 25 years.
"I’ve seen it change with the times, always adding stuff and making it better," he said."This is why Christiana isn’t going anywhere for a long time. Yes, every mall is struggling, but it’s one of the better malls in the country along with King of Prussia (in the area)."
Class is king
Christiana Mall, built over farmland in the late 1970s, is Delaware's largest and without question its most successful mall.
Given its size (more than a million square feet of leasable area), amount of anchor stores (five), the variety of stores and its dominance, itis considered a super regional center by theInternational Council of Shopping Centers, the globaltrade associationof theshopping centerindustry.
Managed by GGP Inc. (formerly General Growth Properties), which owns about 50 percent of the real estate on-site (some stores, like JCPenney and Macy's, own their land), the mall is Delaware's premier"Class A" mall, a classification with varying definition sometimesassigned to malls that bring inmore than $500 per square foot.
While smaller malls, like Dover Mall, are seeing some decline, Class A mallslike Christiana– which attracts more than 20 million visitors annually, according to GGP– are surviving and thriving.
Houston-based Chilton Capital Management's real estate investment trust team wrote last February:"Class-A mall REITs are enjoying healthy rent and occupancy growth while benefiting from the closing of their local competition."
That appears to be what is happening in Delaware.
"While everybody else is falling apart and malls are turning into ghost towns across the country, a lot of Class A malls are showing increased foot traffic," said Jeff Holzman, managing director of iintoo,a social investment network specializing in exit-oriented real estate investments.
GGP, a publicly traded company that invests in shopping centers, has about 125 properties in its portfolio, and Christiana is its only Delaware site.
"As you review some of the media coverage of retail, it’s widely reported that centers that are considered Class A, such as Christiana, will adapt to the changing retail cycle and remain successful for years to come," said Steve Chambliss, senior general manager at the Christiana Mall. "Good real estate always wins."
Chambliss has been at Christiana for about 10 years with previous experience at the East Coast's biggest shopping destination, King of Prussia, and atanother GGP property, Neshaminy Mall.
He touted the mall's central location, its proximity to dining options and Delaware's tax-free shopping as the biggest reasons for success.
'Synergistic'
While there has been surrounding retail for years, Christiana Mall has always been the dominant shopping center. It will probably always be that way, but the emergence of the Fashion Center is giving shoppers an open-air supplement.
That doesn't mean the mall is in any sort of danger.
"In general, the Fashion Center has a different selection of merchandise than the mall has so it’s synergistic to be able to have shoppers travel to this area from outside of the market for a wide selection of merchandise options," Chambliss said."We are not competing with each other, but share the same customer in many cases."
Jim Oeste, vice president of real estate for Fashion Center's owner, Allied Property,agreed.
"Retailers are drawn to other retailers," he said."When a group, whether it's a mall, shopping center or freestanding retailer, if they're successful the other retailers want to be with them."
It's similar to what's happening in King of Prussia, where the massive mall is supplemented by the King of Prussia Town Center. The Fashion Center isn't quite to that levelyet or at the level of what's been created down in Tyson's Corner in the Washington, D.C., area, but it's a good sign of growth.
"It [Fashion Center] easily has a 20-year lifespan," Oeste said."But like any other business, it changes over time."
The first week of March featured the opening of Delaware's newest entertainment destination, Main Event,there. The facility features bowling, laser tag, gaming and more.
But, more importantly, it also has a bar and restaurant that will add to a growing list of food options that will sooninclude Philadelphia-based Honeygrow and a fast-moving Neapolitan pizza concept, MidiCi.
Research from the Federal Reserve Bank of St. Louis shows that sales at restaurants and bars have grown twice as fast as all other retail spending. The Christiana area continues to see restaurant expansion.
"The way I look at it is, retail, like other businesses, continues to evolve and change," Oeste said."You have to kind of evolve and change with it. You have to listen to your customers and know what they’re looking for."
And that includesstrategies to mix online and in-store retail.
"Retailers have to carefully think how they can capture both convenience andbreadth of assortment that is available online that can be shipped quickly to your home andthe ability of shoppers to have a social experience and be able to touch and feel what they buy and learn all about it," Chambliss said.
Despite the fact that Amazon's sales in North America jumped from $16 billion to $80 billion between 2010 and 2016, there's no way, Chambliss said, that online retail could exist without some semblance of physical store locations.
"Not anyway I can see, just because of shoppers' habits," he said."We’re seeing the reverse happen more now than we did in the past. The retailers that are only online are finding that they have no brand awareness so they’re coming into the malls like ours because they want to be able to have that brand awareness that they can’t get solely online.”
Holzmann agreed. The real estate investment specialist said that the "paradigm shift" in malls is more of an evolution and not a revolution. He mentioned places like Dave & Buster's providing entertainment and food– like Main Event will in the Fashion Center– and being good anchors becausethey're "less susceptible to losing market share to online retail."
"A lot of times people literally need to take their kids out of the house to do something," Holzmann said."Once you’re in the mall, shopping happens."
Keeping up
While many blame Amazon and the internet for killing their favorite retailers, the simple truth is there were way too many malls in the United States.
Per Cowen and Company's research analysts, reported in an Atlantic article on the "Great Retail Apocalypse," the number of malls in the U.S. grew more than twice as fast as the population between 1970 and 2015. Gross leasable area in shopping centers per person in the U.S. is more than that of Canada, the U.K., France, Germany, Italy and Spain combined.
While many malls will be closing,Christiana Mall, which has seen many department store changes over the years, is still growing. The addition of Target, which replaced a Lord & Taylor anchorin 2010, was followed shortly after by a 123,000-square foot Nordstrom and a wing of high-end retail that filled a hole vacated by Strawbridge's.
And 2014 saw the openings of the 100,000-square foot Cabela's and nearby Cinemark Theatres.
There has also been plenty of change and renovation inside the mall.
The space is nearly maxed out, Chambliss said, and any further growth would have to be vertical.
"Nothing is planned right now to go vertical," Chambliss said.
"I wouldn’t rule anything out," he said.
In Christiana, as retail trends downward nationally, up is the only way forward.
Contact reporter Jeff Neiburg at (302) 983-6772, jneiburg@delawareonline.com or on Twitter @Jeff_Neiburg.
