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Ailing malls shopping for a new identity

Woes surfacing amid decline in spending

By Jenn Abelson
Globe Staff / March 22, 2009
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KINGSTON - Independence Mall should be celebrating its 20th birthday this year with fanfare. Instead, the shopping center here, pocked with empty storefronts like missing teeth and rattled by rumors of its demise, has postponed the festivities and is simply trying to survive.

In the past year, the mall has lost two major stores to bankruptcies - Steve & Barry's and Linens 'N Things - and other closings have sent its vacancy rate soaring. Traffic is down and Independence is struggling to attract tenants with the recession and the recent opening of nearby Colony Place, a vast new shopping plaza with more restaurants, convenient parking, and specialized shops.

"It's not exactly the best time to be celebrating retail," said David DesRochers, marketing director for Independence Mall. "We're going through a lot of changes and trying to redevelop the center."

Across the country, ailing malls are attempting to reinvent themselves amid cutbacks in consumer spending, massive store closings, and overbuilding by mer chants. Some retail analysts expect up to 200,000 shops to shutter nationwide and more than 2,000 shopping centers to cease operations over the next year.

Signs of distress are apparent across Massachusetts. Westgate Mall in Brockton last week said it is postponing indefinitely a plan to add a movie theater to replace a Filene's department store that closed several years ago. A huge torn-up lot surrounded by a chain-link fence is the only evidence of the moribund project.

General Growth Properties, the nation's second-largest mall operator, is on the verge of bankruptcy and has put up for sale a marquee property, Faneuil Hall Marketplace in Boston. At General Growth's other location, in Natick, a plan to merge a mall with condominiums has foundered. Many of the dwellings remain unsold, and shoppers are scant in the upscale retail expansion.

Meanwhile, Simon Property Group has shortened hours at its centers, including the Mall at Chestnut Hill, where Shreve, Crump & Low, Stoddard's Cutlery, and other shops have closed and not been replaced. Simon and its retailers "are focused on energy conservation," said Laurel Sibert, Simon's portfolio vice president of mall marketing for New England.

"This change also brings the hours more in line with those of many Simon malls throughout the country," Sibert said.

Malls, the sprawling shopping meccas that Americans first fell in love with 50 years ago, saw its heyday in the 1970s and '80s when hundreds of them were built. These enclosed shopping prairies were the "it" place to be. But malls have faced threats for years with the consolidation of department stores, growing popularity of online shopping, and the emergence of new outdoor venues, such as lifestyle centers. No new enclosed malls have opened in the United States since 2006.

"The mall as we know it is in survival mode," said Robert F. Sheehan, vice president of research at KeyPoint Partners in Burlington. "Some will survive. But how many, how well, and for how long? It's anyone's guess."

In recent years, easy money fueled consumer spending and Americans who tapped out home equity lines and maxed out credit cards helped the country's roughly 1,100 malls thrive and even grow. During that time, mall operators poured billions of dollars into expanding their properties, adding condos and movie theaters.

But the recession has pounded malls, which concentrate on the kind of discretionary shops that cash-conscious consumers have abandoned. And now, problems that have been festering for years are in the forefront.

Developers and mall operators have hundreds of millions of dollars in debt coming due just as mall merchants - from KB Toys to Wilsons Leather - close shops at an unprecedented pace. Vacancy rates in the country's regional malls rose to 7.1 percent at the end of 2008, the highest rate since research firm Reis began tracking the data in 2000. The vacancy rate at Independence Mall has jumped to 12 percent from a low of 8 percent in 2007. And about 10 percent of the mall is now occupied by shorter-term specialty shops, including two massage parlors and Open Box, a store that sells discounted and liquidated merchandise.

On a recent Monday, Chad Wise, 30, sat in the food court at Independence Mall with his eyes glued to a Keno screen. Wise, an unemployed contractor in Plymouth, said he comes to the mall to the play the games but hadn't shopped here in months. He makes most of his purchases online and finds the nearby Colony Place a more attractive option. Colony Place isn't immune to the retail pressures with one tenant, Circuit City, recently going belly up. But the center has fared better, offering more restaurants and shops like Wal-Mart and Sam's Club selling everyday necessities.

"It doesn't have a heartbeat," Wise said looking around at the empty storefronts at Independence Mall. "The mall used to be the only place to go. But now there are so many better options. It's lost its appeal."

In a December study of consumer dissatisfaction with malls, 35 percent of respondents complained that malls lack anything new or exciting and have a limited selection of restaurants. Another 28 percent reported that too many stores carry the same merchandise, according to the Baker Retailing Initiative at the Wharton School of the University of Pennsylvania and the Verde Group, which conducted the survey.

"Malls have been deteriorating for years and they refused to do anything. They've been in denial and they can't deny it anymore," said Mike Tesler, president of Retail Concepts, a consultancy in Norwell. "It's going to be a long period of rehab. There will be casualties. But for those malls that survive, they're going to have to entirely change their lifestyle, who they are, how they operate."

Tesler says malls will need to shake up the mix by bringing in office tenants and yoga studios, improving convenience with covered walkways, and attracting retailers such as Ikea and Costco that pull in customers the way Sears and Macy's once did.

"There are real challenges," said Luciano Villani, general manager of the Westgate Mall in Brockton, which has a vacancy rate over 10 percent. "We just continue to try and fill the spaces."

The mood is uneasy among the employees of Independence. At URelax, John Xu stood in his blue scrubs in his empty massage store. It was 4 p.m., and he had seen only one customer. Jenna Stonier, a hair stylist at the MasterCuts, expressed the concern that is on everyone's mind.

"There's been lots of rumors they're just going to close it down," she said. "It's changed a lot here."

But executives at the Pyramid Cos., which runs Independence Mall, rebuff the notion that the shopping center is closing and say they are planning for a bright future. Some office workers are supposed to move into the space left empty by Linens 'N Things and a local eyebrow threading salon opened in a former Cingular shop. And the mall is hosting its first prom fashion show this afternoon to try to lure customers.

Plans are underway by Pyramid to offer a broad mix of retail and entertainment at Independence, which already has a movie theater, with a project similar to the one completed recently at Walden Galleria in Buffalo. There, a new "Theatery" expansion included a 16-screen stadium seating Regal Cinema, along with new merchants such as the Cheesecake Factory and Urban Outfitters.

"Malls are like a town center," said DesRochers, of Independence Mall. "I don't ever see them disappearing. We're just having to reinvent ourselves."

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