WATERLOO — An ongoing seismic shift in the national retail landscape has shaken the Cedar Valley’s two largest shopping centers, but as shopping habits continue to evolve, Crossroads and College Square malls seem likely to adjust.
One thing seems certain, the malls’ owners say: Their properties will continue to draw traffic, but mall tenants are likely to diversify.
“We’re speaking to retailers, office tenants, entertainment users,” said Elliot Nassim, principal with Great Neck, N.Y.-based Namdar Realty Group and Mason Asset Management LLC, which purchased a financially troubled College Square in Cedar Falls in March 2015 and bought Crossroads in Waterloo in January 2017.
Both malls are longtime staples of the Cedar Valley retail trade. Crossroads opened in March 1970 at the corner of U.S. highways 218 and 20. College Square opened in November 1969 along the University Avenue corridor near the University of Northern Iowa. Both malls have had a succession of owners and managers over the decades as tenants large and small have come and gone.
Today, Crossroads has a little more than 50 businesses ranging from retail to military recruitment. College Square has 27 retail, restaurant and service-oriented businesses. College of Hair Design, which moved into the mall from downtown Waterloo, and Planet Fitness, are two newcomers.
Both malls — and retail areas surrounding them — have seen big changes in the last 20 years. Crossroads has seen major tenants like Sears, JCPenney and others disappear. Only this year, Younkers announced it was closing its stores at Crossroads and College Square. The Scheels sporting goods store closed at both malls and opened a new, larger store at Viking Plaza on Viking Road in Cedar Falls in 2013.
However, for every setback, there is opportunity, said Nassim, who noted his group owns 125 commercial properties — including 40 enclosed malls – across the U.S.
“Obviously, Namdar and Mason specialize in retail all across the country,” he said. “We bought College Square several years ago and Crossroads more recently, and we look at all markets across the country.”
That the group owns both Cedar Valley malls was more by coincidence than design, Nassim said.
“The Iowa market is very good,” he said. “Both properties are very well located.”
Store closures have been setbacks, but mall ownership is as bullish as ever on the properties’ potential, Nassim said.
“We’re working aggressively to bring in new businesses,” he said. “We’ve done Planet Fitness and the cosmetology school in College Square. We feel we have a competitive advantage. We can offer deals and could consider deals that maybe other landlords couldn’t.”
Diversification is the key, said Jim Benda, a commercial real estate specialist with Cedar Falls-based real-estate firm Lockard Cos.
“The big retailers with an interior mall entrance-only, those days are probably over,” Benda said. “Convenience is driving the customer to want to walk into one specific store. But it offers opportunities for people willing to redefine their spaces or uses.”
Such new uses could include “sports- or play-related” facilities that might complement existing retail establishments, Benda noted.
“There are plenty of these uses out there,” he said.
The alternative isn’t palatable, said Charles King, principal analyst with Heyward, Calif.-based consultancy Pund-IT.
“We’ve got two malls in our area that are on the brink of being hollowed out; I’m sure you’ve seen in Iowa stores are dying one by one. Nobody goes to them, and it’s an ugly process to watch,” he said.
But it doesn’t have to happen, particularly where owners are innovative.
“There’s a lot of chatter about, in some cases, new investors have come in and redesigned malls around different kinds of uses,” King said.
Some ideas include combining housing, retail and entertainment to create a sustainable community, King said.
“I’ve seen folks talking about taking the space involved, taking part of it to create housing and create a kind of retail environment around that to support the people there,” he said. “We have cities build multistory blocks of buildings with condos and townhouses with retailers and restaurants that create kind of a community in a box.”
Whether entrepreneurs can realize that vision likely will depend on their ability to secure friendly lease rates, Benda said.
“It’s at an entirely different price point for the lease, so there’s a lot of folks who could probably utilize the space, but the malls at the value they’re at today can’t accommodate them because they need so much more rent,” he said.
A day-care facility might find optimum use for ample square footage available in malls if the price is right, for example. Medical clinics also might find a fit.
“People don’t want to wait an hour to see a doctor; they want to walk into an urgent care and see their doctor in 10 or 15 minutes,” he said. “There’s an opportunity for malls to capitalize on that.”
Sports activities — soccer fields, basketball/volleyball courts and the like — also could play roles, Benda noted.
Will it happen?
“Mall owners are being forced, so, yes,” he said. “A lot of the vacancy you’re seeing is because traffic has left those malls, a lot, and we haven’t catered to service- or entertainment-type venues. Again, it’s very early in its transition.”
College Square has had additional challenges all its own with the reconstruction of University Avenue.
Phase I of that construction project now is complete, but there’s still a lot of vacant retail space along the University corridor.
“College Square is not seeing the benefits of it right now, nor do I think the other surrounding properties along University Avenue are; I think there’s probably 1 million square feet vacant,” he said. “Until University Avenue is done, that trend will continue. Nobody wants to open on a road that’s under construction. But I do think University Avenue looks nice. The question is whether all the customers will come back.”
The city did its best to keep the traffic flowing during Phase I of the University project, said Stephanie Sheetz, Cedar Falls community development director.
“Any road construction is disruptive,” she said. “A major project like University Avenue gets noticed more by the public; however, access was always maintained to all the businesses. We worked very hard to maintain that access and encouraged people to continue supporting our businesses in that area.”
The departures of Scheels — and years earlier Walmart — left a mark on College Square.
“Both were big foot-traffic generators, so smaller tenants suffered and have since left,” he said. “And, of course, you’d seen the redevelopment of strip centers near those two facilities (Crossroads and College Square), and they’re all doing pretty well.”
That means both malls have to come up with a new definition of how to use any square footage left behind.
It’s a direction in which malls are headed across the country, said retail analyst Rob Enderle, himself a former shopping center manager and current owner of the Bend, Ore.-based Enderle Group.
“Malls were built around anchor tenants that were once largely department stores. With department stores largely becoming obsolete, these centers must find new ways to bring in traffic,” Enderle said via email. “Restaurants, theaters, arcades (current generation like Disney Void) and amusement parks can bring in the traffic depending on the target demographic.”
A mall still can sustain traffic, Enderle said.
Nassim pointed to Planet Fitness and the College of Hair Design as examples of how malls are diversifying while nurturing their core function as a shopping destination.
“There’s still a lot of restaurants surrounding the property, and people are frequenting them,” he said. “There’s certain shopping that’s here that’s not there.”
Each mall is actively marketing its facilities, Nassim noted.
Crossroads also has government and military office space, with an Iowa Department of Transportation and Driver License Station, as well as recruitment offices for the U.S. Air Force, Army and Navy.
Offices can also “assure steady traffic” but alone they don’t provide enough, Enderle said.
“Think something like Santana Row in Santa Clara, Calif., which is doing just fine and doesn’t have a single department store anchor,” Enderle said. The concept is about “live/work/play,” he noted.
What is Enderle’s best-case model for a large mall built for late-1960s retail sales.
“You are likely looking at a significant remodel and redesign around more of a theme shopping center with food and/or recreation as the main draws,” he said.
Residential use also can be part of a new mall business mosaic.
“Likely a blend of those elements to assure traffic is maintained,” he said. “But the traditional department store anchor center is done, and it has been on the way out for several decades. Amazon just sped its demise up substantially.”
Melody Wright disagrees vehemently. Wright, chief operating officer of Davenport-based retailer Von Maur, notes her store, which has anchored College Square since 1987, is doing fine at that location.
“We have a loyal following in the Waterloo-Cedar Falls area, and we are committed to providing the community with great service and great product,” Wright said.
A key to the store’s success is giving customers what they want and can’t find anyplace else.
“I think it goes back to a lot of brands we carry you can’t get anywhere else in the Cedar Valley,” she said. “The unique products continue to be a staple there. Building loyal customers — they know they’re going to be able to find the product they can’t get anywhere else.”