July 12, 2009 in Business

Mall shake-up

Tough economic times force retail changes
By The Spokesman-Review
 
Kathy Plonka photo

A shopper walks past Graffiti Skate Shop in Coeur d’Alene’s Silver Lake Mall. Mall managers are struggling to keep businesses afloat during the recession.
(Full-size photo)

Retail sales drop from 2008

From January through April 2009, retail sales fell across the board compared with the same four months in 2008:

Coeur d’Alene …Down 14 percent

City of Spokane Valley … Down 13 percent

City of Spokane … Down 3.1 percent

Spokane County …Down 11 percent

Idaho and Washington sales reports

When Chicago-based General Growth Properties Inc. filed for bankruptcy in April, the news set off alarms for dozens of Spokane and North Idaho retailers doing business in three area malls owned by that company.

Their concerns eased once General Growth, the second-largest mall operator in the country, explained the bankruptcy will have minimal impact on the 220 malls it operates.

Spokesman David Keating, in an e-mail, said General Growth is restructuring its debt and will sell some of its East Coast properties. But he insisted General Growth’s three area locations – NorthTown Mall, Spokane Valley Mall and Silver Lake Mall in Coeur d’Alene – are not included in the for-sale group.

“To use an over-used cliché, it’s been ‘business as usual,’  at GGP,” Keating wrote.

The main fear for many Spokane-area mall workers and managers is that waiting out the recession will only lead to less business than usual.

But rather than hope customers recover enough confidence to open their wallets, area malls are experimenting with new ideas and different marketing strategies.

John Shasky, general manager of the NorthTown Mall, has pushed to find a cross-section of new businesses to revive the mall’s retail lineup. During the last U.S. recession, in 2002 and 2003, NorthTown Mall had as many as 15 store vacancies. Now it has about 30 vacancies, Shasky said.

Most malls rely on jewelry, shoes and clothing retailers, with some consumer electronics stores thrown in the mix, he said.

In the past three months Shasky and his staff have recruited:

•A mini-mart, complete with candy, soft drinks, sandwiches and over-the-counter medicines. Peter Park, who runs the Sure Save Grocery on North Division Street, moved into the mall in April. Shasky convinced Park that the mall would benefit by having someone who sells those items to mall workers and visitors.

•A personal fitness center, which will offer personal training seven days a week.

•A barbershop on the second level.

“I think malls might want to look at adding more services,” Shasky said. “We might even consider offering a dentist’s or doctor’s office,” he said.

“Because we have spaces open, this is an opportunity for businesses to join us who might never think of coming into the mall,” Shasky said.

The hope for nearly all mall managers, according to retail analysts, is to change the mindset of consumers sitting on their wallets. With jobless numbers climbing, consumer confidence continues to spiral downward, according to national analysts.

Green Street Advisors, a real estate consulting firm, said the average decline in mall sales across the country was 6.5 percent, as of April 1, compared with one year earlier.

The number of empty stores in malls has also reached a 10-year high. Mall store vacancies rose to 7.1 percent as of the first quarter of this year, said Reis Inc., a New York company that tracks malls.

General Growth does not release sales results for its malls or tenants.

While NorthTown has 30 or so vacancies, the Spokane Valley Mall has roughly a dozen vacant stores out of about 60.

Silver Lake Mall has 15 vacant stores and several empty kiosks, out of 40 or so stores.

Daryl Rheingans, the manager of both Silver Lake and Spokane Valley malls, could not be reached for comment.

Downtown Spokane’s mall, River Park Square, has five vacant stores, out of 55, said the mall’s general manager Stephen Pohl.

“Compared with our competitors, I think we’re doing a bit better,” Pohl said.

Cowles Co. controls the entities that own and operate River Park Square. Cowles also owns Cowles Publishing Company, which publishes The Spokesman-Review.

Pohl said the draw of downtown Spokane is one reason River Park Square is doing better than the national average. Surveys suggest the downtown mall has become a destination for out-of-of town visitors. He said one-third of River Park Square shoppers come from outside Spokane County. About 15 percent are from Canada, Pohl said.

Despite the retail gloom, some mall businesses are not struggling and even are expanding operations.

Tom Goodman, who has three skateboard and snowboard shops in all three General Growth malls here, said his stores are “all doing fine.”

“General Growth has been great to us,” said Goodman, whose stores are named Graffiti Skate Shop. “So much so that I’m working with them to open two more of my stores in Arizona.”

To help Goodman move into a vacant store last winter in the Spokane Valley Mall, Rheingans gave him a full month to set up the shop without charging rent.

Goodman said sales at the Silver Lake Mall store are 5 to 10 percent below last year, and the NorthTown store is down closer to 20 percent. “That’s maybe due to us opening the Valley store, which took some of the business,” he said.

Two other Spokane-based retailers, Spokandy Chocolatier and Collector’s Zone, a sports memorabilia retailer, abandoned the malls after failing to negotiate lower lease rates, the company’s owners said

Last month Spokandy, which makes candies and ice cream, closed its stores in the Valley and NorthTown malls, owner Todd Davis said. Spokandy had operated in the Valley mall since 1997 and at NorthTown for the past nine years. The company’s retail sales were consolidated at its downtown Spokane headquarters, at 1412 W. Third Ave.

Collector’s Zone owner Ann Campbell closed her store in the Valley Mall last month, after failing to negotiate a better lease deal, she said. She moved to a strip mall in Spokane Valley.

Davis said he knows the retail industry is challenging. He doesn’t blame Rheingans or Shasky for not cutting his lease. “I know that if word got out, other tenants would be lining up asking for the same, and it all starts to spiral down,” he said.

But he also said he’s not sure being inside the malls is worth the price he was asked to pay. “Those malls are beginning to lose that uniqueness” and the quality that helped attract people in the first place, Davis said.

Davis said a small mall operator in Clackamas, Ore., recently approved giving his Spokandy store there a new lease with three months of free rent, plus a guarantee not to raise his rent over the following 10 months.

Shasky said corporate guidelines prevent him from discussing terms of tenant leases or lease negotiations.

Campbell, whose Collector’s Zone store was in the Valley Mall the past nine years, said May was her worst sales month ever.

Even so, she said mall management refused to lower her lease.

“Generally we did fine in the mall,” Campbell said. “But lately they have nothing out there (at the Valley mall) to draw people.”

Shasky said whenever the retail sector plummets, the news media trot out “Is the mall dead?” stories. The industry continues to change and add new ideas to appeal to consumers, he said.

Malls will survive, Shasky said, because they still provide a cluster of retail businesses in one place.

“We have so many retailers under one roof, we’re still drawing plenty of traffic,” he said.

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