Malls and shopping centers across the nation are experiencing a significant recovery since the doldrums of the Great Recession. In New Jersey, the resurgence is evidenced by national and international mall owners spending millions of dollars renovating and expanding facilities here. Meanwhile, an 800-pound sleeping gorilla is awakening from its 12-year slumber at the Meadowlands, as the gargantuan American Dream Mall is expected to open by the summer of 2017. This $3.2-billion, 2.9-million-square-foot project, with an estimated 400 retailers, restaurants, services and grand-scale entertainment features, will impact the retail landscape in northern New Jersey, but to what degree still remains to be seen.
As it stands, mall tenants nationwide have been experiencing increasing sales these past two years; perhaps the best results since 2008 and 2009. This growth, according to Jesse Tron, spokesperson for the International Council of Shopping Centers (ICSC), New York, is not a “U” shaped parabola upswing, but tiered, measured growth. “Barring another dip that can come from a multitude of factors, we can continue to see this steady growth moving forward,” he tells New Jersey Business.
Occupancy levels at malls nationwide for year-end 2014 were 94.2 percent. Sales increased by 21.3 percent to $475.00 per square foot of gross leasable space.
“Mall occupancies are basically at historical levels; the highest they have been since 1987,” Tron continues. “The industry is in a very strong position at the moment from most operating metrics. Retail sales are solid, but I wouldn’t say they are off the charts. We are almost seeing a landlord’s market and rents are rising.”
There are some 2,560 shopping centers and malls in the Garden State, consisting of 195.6 million square feet in 2014, up from 2,554 facilities consisting of 195.3 million square feet in 2013. These retail centers comprise just 2.6 percent of the 7.5-billion square feet of US shopping center space. Sales at these New Jersey facilities were $81.6 billion last year, versus $79.6 billion in 2013 ($2.5 trillion in the US in 2014). Regarding jobs, New Jersey shopping centers employed 377,520 people in 2014, up from 370,360 in 2013.
Tron expects to see the addition of new space in the not-to-distant future, “but that is not what the industry is doing right now. There is not a lot of brand new ground-up (greenfield) development occurring. Mall and shopping center owners are pumping a lot of funds back into their existing projects; getting them up-to-date from an aesthetic standpoint and adding more features, newer technologies, better parking and better lighting, etc.
The goal, of course, is to attract more shoppers, including all age-based demographic groups: Generations X, Y, Z and Baby Boomers. This is being done through enhanced dining options with expanded food courts, café-style dining, more white table cloth dining and celebrity chef restaurants. “Even the shopping center movie theater is being reimagined in some scenarios with bars and full dining service,” Tron explains.
Bigger and better entertainment features is another trend.
“The industry has noticed that attracting consumers doesn’t only have to be about straight shopping. Consumers are craving more than that. They want an experience,” he says.
Triple Five Group’s American Dream Mall at the Meadowlands may be the ultimate mall destination in the region when it opens, as it plans entertainment offerings not seen before at New Jersey-based shopping malls. In store for children of all ages will be: DreamWorks’ 300,000-square-foot glass-domed indoor amusement park and its 225,000-square-foot glass- domed indoor water park; the Big Snow America Indoor Ski Hill, the first indoor ski and snowboard park in the western hemisphere (180,000 square feet at 16 stories high); an indoor ice skating rink; The Dreamview observation wheel (formally the Pepsi Globe under the former Xanadu project) at 235 feet in diameter with 26 climate-controlled gondolas; a Legoland Discovery Center; Sea Life Aquarium; a performing arts center with 1,200 to 1,800 seats; 14 planned restaurants; and an 800-room hotel that is expected to open within six months after the mall opens.
Ever since the idea for the complex debuted as the Mills Corporation’s Xanadu, there were doubts as to whether the American Dream would be finished. Initial work at the site began in 2003, but a host of problems – including environmental, legal, traffic, issues with the New York Giants and Jets, and The Mills Corporation’s own financial difficulties (the company was sold to Simon Properties and Farallon Capital Management in 2007) – delayed work at the site. Colony Capital then took over the project and an official opening date was moved back to late 2008. Colony, however, soon experienced its own difficulties as financial markets took a hit, marking the beginning of the Great Recession. By 2011, the Christie Administration and the New Jersey Sports and Exposition Authority (NJSEA) transferred the project to Triple Five, owners of the world’s first, second and third largest tourism, retail and entertainment complexes of their kind, including The Mall of America in Minnesota and the West Edmonton Mall in Canada.
According to a state press release, the project is expected to create more than 8,900 construction jobs and up to 35,000 permanent jobs. Jim Kirkos, president and CEO of the Meadowlands Regional Chamber of Commerce, comments that the region saw the substantial economic impact of the Super Bowl, Wrestlemania, international soccer and concerts, which brought millions of people to the area, but “the American Dream pumps this up 20-fold,” he says. “The mall has the ability to drive 40 million people every year. Last year, Triple Five’s Mall of America brought 42 million visitors to the middle of Minnesota, which experiences minus 15 degrees Fahrenheit weather in the winter … and it is not next to the greatest city in the world. The American Dream is going to be a game changer for the entire Meadowlands region.”
Already, major retailers are making commitments to locate at the mall. They include Saks Fifth Avenue (131,906 square feet), Saks Fifth OFF 5th (30,000 square feet); Lord & Taylor (119,605 square feet), Aritzia, Lululemon, Banana Republic, GAP, MAC, Microsoft, Pink, Uniqlo, Victoria’s Secret, Zara, Hermes USA and Toys“R”Us.
To what degree the American Dream will siphon business from other malls in its northern New Jersey vicinity remains to be seen.
Gilbert Bankton, general manager of the Willowbrook Mall in Wayne (Passaic County), which is just 13.5 miles west of the American Dream, says, “We are keeping the new facility on our radar screen. American Dream is in Bergen County, so it falls under the restrictions of the county’s blue laws. So, we are providing that [shopping need] for Bergen County customers. Everyone who shops at Willowbrook comes from Passaic, Essex, Morris and Bergen counties.”
Willowbrook, a General Growth Properties’ mall, announced over the summer that it will undergo a 1.5-million-square-foot, multi-million-dollar renovation that will incorporate aesthetic updates to the property’s interior and exterior. “This is a two-year project that will include new lighting, new floor tiles, new ceiling tiles, an extended food court, the raising of storefronts in the center court area, and enhanced directional signage,” Bankton says. The last time the mall underwent a major renovation of this scale was 1988. The facility originally opened its doors in 1969.
Bankton says the mall has been able to maintain a successful business plan with the new retailers it is bringing in. In the past year, this has included Microsoft, Sur La Table, Seva Beauty and Charlotte Rouse. Its main anchors include Macy’s, Lord & Taylor, Bloomingdales and Sears. The mall includes 1.5 million square feet of space and some 200 tenants. Bankton proudly adds, “We have no vacancies right now; that is how strong this market is.”
Explaining her thoughts on the opening of the American Dream, Denise Palazzo, general manager at The Mills at Jersey Gardens in Elizabeth, comments that the Simon-owned property is a discount outlet center (the largest retail outlet in the state, she says), while the American Dream is a traditional mall with entertainment. “We will continue to build upon our outlet brand. I don’t see the American Dream having an adverse effect on us … I think we will complement each other well,” she says.
Simon purchased The Mills at Jersey Gardens from Glimcher Realty Trust in early January, when Glimcher was acquired by Washington Prime Group. While Glimcher completed a $30-million renovation of the 1.3-million-square-foot property in 2013, Simon will start a 411,000-square-foot expansion to the 200-store complex, to be completed by 2018.
What is special about The Mills is that it attracts multitudes of international visitors, many who arrive via a shuttle bus from Newark Liberty International Airport, which departs every 30 minutes. The complex also receives Manhattan visitors via buses from the Port Authority Bus Terminal. “With 38 million visitors coming in from Newark Liberty International Airport alone, this center has become a top tourist destination, “ says Crystal Fresco, marketing director of the facility. “We had visitors from 160 countries and all 50 states last year. The highest concentration of visitors come from Central and South America and Western Europe.
“These visitors come with empty suitcases in hand to purchase goods. If they don’t have one, they will purchase a suitcase here and fill it up,” Fresco continues.
Because of the diverse international tourist mix, The Mills has been able to weather downturns in the economy. “We are not relying on one specific country at any time,” explains Palazzo. “The international market has sustained and propelled us each year.”
The major retailers at the outlet center include Burlington Coat Factory, Saks Fifth Avenue OFF 5th, Neiman Marcus Last Call, Century 21, Michael Kors, Coach, the largest Tommy Hilfiger in the US, and more. Restaurants include Johnny Rockets, Chili’s, Applebee’s and a food court.
While ICSC’s Tron says that many mall property owners are expanding facilities rather than building new complexes on greenfields, Simon has bucked the trend in New Jersey with the recent grand opening of the 376,000-square-foot Gloucester Premium Outlets in Blackwood, a single-level style, village setting with its own Town Square center and four courtyards.
According to Kristen Murdica, general manager of the property, Simon chose the location because of the potential for residential and new business development in the area. It is 14 miles east of Philadelphia and 45 miles west of Atlantic City, with close proximity to the Atlantic City Expressway, Route 42 and the Black Horse Pike. Customers are coming as far away as New York, Delaware and beyond, Murdica says.
Currently, 90 percent of the outlet is leased. Major retailers include Armani Outlet, Banana Republic Factory Store, Calvin Klein, Under Armour and Vera Bradley. Full- and part-time jobs at the mall is estimated at 800.
When asked what the “wow” factor is at the center, Murdica responds it is the Town Square with 6,000 square feet of green space and oversized games, such as chess and Jenga, and a fireplace in the center area.
Discussing the impact that online shopping has on mall business, Murdica responds, “With online technologies, customers are just becoming more savvy in terms of making purchases. They are doing their homework before coming in the stores, which is why the outlet industry is so attractive right now. I also think people want to come in and feel the cashmere sweater they want to buy or see the sparkle of the jewelry they want to purchase.”
Glenn Brill, a managing director at FTI Consulting’s Real Estate and Infrastructure Solutions practice in New York, who has provided retail advisory services for large scale projects all over the world, comments that 90 percent of retail sales still take place in a brick-and-mortar environment. “What has happened is that shoppers want the omni-channel approach: This is the synergistic relationship between the physical presence and e-commerce,” he says.
Overall, Brill says that shopping centers and malls are trying to reinvent themselves to become “little retail villages with a usage mix.” This incorporates socializing, via eating and drinking at onsite restaurants, and the bigger entertainment venues. “If done right, malls want to create community centers on steroids,” he says.
With so many strip retail centers, shopping centers, outlets and malls dotting New Jersey’s major highways, one needs to ask: “Is the state over-malled?”
John Holub, president of the Trenton-based New Jersey Retail Merchants Association (NJRMA), responds that since “New Jersey is so densely populated and its residents enjoy one of the highest per capita incomes in the nation, even at our economic worst, New Jersey will always remain attractive to retailers. I am hesitant to say New Jersey is over-retailed. We are not seeing a mass number of stores closing.”
The bottom line explanation for mall success always leads to the consumer, as ICSC’s Tron states, “A healthy consumer means healthy retailers, which means healthy shopping centers.”