The prototype for the enclosed malls that transformed the retail environment nationwide opened in Edina, Minn., as the Southdale Center in 1956 as a model never actually realized, but now coming full circle by necessity.
The ascendancy of the malls, which quadrupled in number between 1970 and 2017, coincided with the migration from inner cities to suburbia, where zoning prohibited retailers in residential areas.
Victor Gruen, an Austrian architect, designed Southdale as a smaller city of sorts.
Department stores were placed at opposite ends as magnets. Smaller retailers with nondescript storefronts lined the interior, incurring higher rents because the anchors existed to increase foot traffic. He envisioned it as the focal point in a 463-acre development that would include surrounding apartments, offices, schools and health-related facilities.
Gruen’s dream didn’t occur in Edina and rarely elsewhere, but may be playing out now with malls in survival mode.
More than 5,300 stores have closed this year and 8,600 may eventually shutter during 2018, including such former household names as Sears, Kmart, J.C. Penney and the BonTon department stores (Younkers, Herberger’s, Carson’s, etc.). Department stores alone have shed 448,000 jobs since 2002, while the emerging e-commerce sector only added 178,000.
In the past few years, Crossroads Center in Waterloo, which opened in March 1970, has lost major tenants like Sears, J.C. Penney, Scheel’s and, most recently, Younkers. College Square in Cedar Falls, which debuted in November 1969, also lost Scheel’s and Younkers.
As some prominent anchors disappear and smaller retailers struggle, malls are increasingly diversifying.
Nationally, they’re adding health and fitness centers; indoor recreational venues from skating to laser tag; educational facilities, including satellite college campuses; day-care centers for children and pets; office space and residential units.
Namdar Realty Group and Mason Asset Management LLC, the New York-based owners of both Cedar Valley malls, recently told The Courier about plans to reinvigorate the properties.
“We’re speaking to retailers, office tenants, entertainment users,” said Elliot Nassim, a principal with the owners.
Crossroads already is home to an Iowa Department of Transportation’s Driver License Station and military recruitment offices.
At College Square, Nassim said, “We’re working aggressively to bring in new businesses. We’ve done Planet Fitness and the cosmetology school (Salon Professional Academy) in College Square. We feel we have a competitive advantage. We can offer deals and could consider deals that maybe other landlords couldn’t.”
“Sports- or play-related” facilities could complement existing retail establishments, said Jim Benda, a commercial real estate specialist with the Lockard Cos., a Cedar Falls-based real-estate firm. He also cited a medical clinic as a possible fit.
While the internet is cast as the primary villain in this play, it is one among many. Online retail sales were up 65 percent from 2011 to 2016, according to the U.S. Census Bureau, but still only accounted for 6 percent piece of the total pie.
The so-called “A”-level malls (Mall of America in the Twin Cities, Coralville outside Iowa City and Jordan Creek in West Des Moines) continue to be profitable. Many surviving big boxes in smaller malls own their own space and are doing well, while others have migrated to strip malls.
The B, C, and D-level malls have had a frequent turnover in ownership and property investment. Namdar Realty Group and Mason Asset Management only purchased College Square in Cedar Falls in March 2015 and Crossroads in Waterloo in January 2017 as the latest of many owners.
Nationally, that has compounded image problems of vacant storefronts exacerbated by boring architecture, deteriorating facilities and pothole-ridden parking lots.
Generational shifts also have had an impact. As baby boomers enter retirement they are less interested in acquisitions, but more into traveling and other diversions.
Millennials have less discretionary income than older generations, facing higher housing and transportation costs and often the burden of college loans. Nationally, they are prone to rent in urban areas a short distances from their needs.
However, they will account for 30 percent of all retail spending by 2020. They have used their purchasing power at boutiques with unique or more personalized merchandise (think offline Etsy) that have set up shop in revitalized downtowns with lower rents amid non-chain restaurants, bars, coffee shops and bakeries — their social gathering areas.
Their elders have followed.
While internet shopping is here to stay, it won’t transcend the basic human need for interaction and social gathering sites. Just as downtowns struggled for years to find the proper pieces to fit the puzzle, malls are in the process of discovering the right formula.
Their revival in the Cedar Valley as envisioned buy the new ownership is dependent on fulfilling Victor Gruen’s dream of creating a community center of sorts — not solely reliant on retail, but various activities and common needs.