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Shopping-Mall Owners Pay Up to Stay Relevant in Amazon Era

Shopping-Mall Owners Pay Up to Stay Relevant in Amazon Era Bloomberg (07/05/17) Mulholland, Sarah (07/04/17) Gagiuc, Anca

Time Equities Inc., the owner of the Newgate Mall in Ogden, Utah, plans to spend $500,000 overhauling the center's outdated food court in a bid to lure both restaurateurs and hungry shoppers. The food hall is indeed part of a larger effort to breathe new life into the 718,000-square-foot mall and increase foot traffic, states Ami Ziff, director of national retail at the New York-based retail landlord. The company purchased Newgate from GGP Inc. for $69.5 million last year. It is one of a number of retail property owners bettering that elaborate makeovers will keep their malls competitive in the age of Amazon. Such companies are turning to everything from new bars and eateries to miniature golf courses and rock-climbing gyms. Today's patrons appear to be more interested in being entertained during a trip to the mall than they are in buying electronics and apparel.

The new tenants will pay higher rents than struggling department-store chains like Macy's and Sears and hopefully attract more traffic for the smaller retailers at the property, states Mizuho Securities USA LLC analyst Haendel St. Juste. On the downside, it's quite costly to build and maintain large, customized spaces that require extensive updates such as commercial kitchens, notes St. Juste. Mall owners' capital expenditures -- ranging from repairs to remodeling to leasing costs -- are rising relative to the income being generated by retail properties. As the retail business evolves, such capital expenditures will become increasingly important in assessing mall property values, concludes Green Street Advisors LLC.