How Shopping Malls Can Reinvent Themselves

Despite the COVID-19 pandemic forcing millions of people to change their buying habits, traditional brick-and-mortar stores and shopping malls "are here to stay," Placer.ai said in a yet-to-be-published white paper.

People Want To Do More Than Shop: Mall tenants realized prior to the pandemic the "one-size-fits-all mall style" needs to be replaced with new tenants designed to generate foot traffic, according to Placer.ai. Some of the opportunities include fitness centers, offices, schools and medical centers.

Gyms and fitness centers like Planet Fitness Inc PLNT have embraced a mall-based strategy. Mall owners need to fully understand traffic trends and consumer habits to maximize these visits.

Foot traffic data compiled by Placer.ai shows Planet Fitness and other chains have similar hourly visit patterns, with high visits between 9-10 a.m. and an evening peak at around 6 p.m.

Mall owners can benefit from an asset that offers the potential for higher weekday traffic. This was the case seen at Mondawmin Mall in Maryland after a Planet Fitness opened there in January 2019. Specifically, year-over-year foot traffic improved from down 4.1% in December 2018 to 0.5% the next month, according to Placer.ai.

See Also: Why Amazon-Simon Property Deal Would Bring Malls 'Closer To Relevancy'

Health Clinics: The health care industry is undergoing a shift from inpatient to outpatient care, and retail pharmacies like CVS Health Corp CVS will become "increasingly sought after tenants," Placer.ai said.

Mall owners would love to have a retail pharmacy on their property because the companies typically boast high credit ratings and sign long-term leases.

Office Space: Malls can find it lucrative to transform empty space to create co-working facilities or office complexes. The workers would appreciate the close proximity to dining, shopping and personal services.

Co-working space provider Industrious opened space in January 2019 at the Scottsdale Fashion Square. The mall saw foot traffic growth nearly double month-over-month from 90% in December to 166.9% in January.

In fact, the mall saw a consistent triple-digit foot traffic growth rate each month through May 2019.

"While a range of factors contributed to these huge leaps, there are strong indications that the core assets of a co-working tenant made a significant impact," according to Placer.ai.

Fulfillment Centers Not The Best Of Ideas: Malls transforming part of their empty space for online retailers to use as fulfillment centers is not a new idea.

But the benefit to mall foot traffic isn't obvious, according to Placer.ai — likely because consumers pick up their products and leave.

A more middle-ground approach would be multipurpose spaces that combine a physical store, fulfillment center, click-and-collect and return centers, the retail data firm said. 

Pop-Ups: Consumers will always want to have experiences with brands despite the rapid growth of e-commerce.

Small brands are afraid of leasing space for the long-term, so pop-up shops are the ideal solution.

Instead of pop-up stores that come and go in a short period of time, mall owners have leased space for short-term durations of six to 12 months.

Online brands like Peloton Interactive Inc PTON are known to take advantage of these short-term leases, creating the opportunity for long-term leases if successful.