By Matt Townsend
20 November 2014
(Bloomberg) – On a crisp Friday evening in late October, Shannon Rich, 33, is standing in a dying American mall. Three customers wander the aisles in a Sears the size of two football fields. The RadioShack is empty. A woman selling smartphone cases watches “Homeland” on a laptop.
“It’s the quietest mall I’ve ever been to,” says Rich, who works for an education consulting firm and has been coming to the Steeplegate Mall in Concord, New Hampshire, since she was a kid. “It bums me out.”
Built 24 years ago by a former subsidiary of Sears Holdings Corp., Steeplegate is one of about 300 U.S. malls facing a choice between re-invention and oblivion. Most are middle-market shopping centers being squeezed between big-box chains catering to low-income Americans and luxury malls lavishing white-glove service on One Percenters.
It’s a time of reckoning for an industry that once expanded pell-mell across the landscape armed with the certainty that if you build it, they will come. Those days are over. Malls like Steeplegate either rethink themselves or disappear.
This summer Rouse Properties Inc., a real estate investment trust with a long track record of turning around troubled properties, decided Steeplegate wasn’t salvageable and walked away. The mall is now in receivership.
As management buys time by renting space to temporary shops selling Christmas stuff, employees fret that if the holiday shopping season goes badly, more stores will close. Should the mall lose one of its anchors -- Sears, J.C. Penney Co. and Bon-Ton Stores Inc. -- the odds of survival lengthen.
“Rouse is basically saying ‘We surrender,’” said Rich Moore, an analyst at RBC Capital Markets who has covered mall operators for more than 15 years. “If Rouse couldn’t make it work and that’s their specialty, then that’s a pretty tough sale to keep it as is.”
Rouse, based in New York, declined to comment beyond an e-mailed statement saying it had determined Steeplegate “would not meet our long-term return on investment criteria.”
The suburban mall once sat at the center of American life. It was a place where parents one-stop-shopped and their kids hung out. The Galleria in Sherman Oaks, California, featured prominently in the seminal film “Fast Times at Ridgemont High” as well as Frank Zappa’s “Valley Girl.” Today malls represent a darker mood in the popular culture. Consider the shuttered shopping center colonized by the dispossessed in “Gone Girl.” [more]