The word mall is losing its place in the retail lexicon. It’s become too dowdy, old-fashioned, and department-store-like. Property owners instead are using terms such as “lifestyle centre” or some other marketing creation that doesn’t imply a less-than-stellar shopping experience.
Traditional malls are on the way out. One in four malls in the U.S. won’t exist in five years, suggests a report from Credit Suisse. If that’s the case, how are investors supposed to spot the winners in retail — both real estate owners and their tenants — when the transition is still very much in the early stages?
Good question. For the answer, investors who live in the Toronto area might want to take a drive to the Shops at Don Mills to see with your own eyes.
“The word mall is a dated word,” Steven Lowy, the co-CEO of Westfield Corporation, one of the world’s biggest mall owners recently stated in Business of Fashion. “It’s been lost in the vernacular.”
Westfield and many of its competitors, such as Canadian mall owner Cadillac Fairview — Toronto’s Eaton’s Centre, Sherway Gardens, and the Shops at Don Mills — have come to the realization that these properties can’t just be filled with apparel stores because the people won’t come.
They’ve got to be that third place or community centre where friends and family can gather to catch up on their busy lives. No longer does the mall with a department store anchor bring the traffic.
“In 2007, 42% of sales at Westfield developments came from department stores. Today, it’s only 28%,” wrote Business of Fashion columnist Lauren Sherman recently. “The company says that only approximately 12% of revenue from its two London malls — two of the most productive in its portfolio — come from department stores.”
The new mall
The move away from department stores brings me back to the Shops at Don Mills.
Once upon a time, the 40-acre property, on which the existing mall sits, was anchored by Eaton’s and was the centerpiece of Canada’s first planned community. Originally an outdoor mall, it was enclosed in 1978, only to be torn down in 2006 and reopened by Cadillac Fairview as an open-air mall three years later.
Go there on a Saturday or Sunday in any season; the central square is full of young families enjoying their weekend.
Yes, Aritzia Inc. (TSX:ATZ) is a tenant of the mall, as is Roots and several other well-known apparel brands, but look closer, and you’ll see there are a large number of food and non-apparel-related stores dotting the property.
Cineplex Inc. (TSX:CGX) opened one of its first VIP adults-only five-screen cinemas in 2014, replacing the bookstore that was previously there. If you’re hungry, there are no less than 23 stores where you can buy food either to eat while you’re there or to take with you. Not only that, but there are offices on the second level and residential condominiums skirting the property, bringing even more people to congregate at the shops.
While there isn’t a gym at the Shops at Don Mills, I could see one opening there. What I can’t see too much more of at the mall is specialty apparel. Several clothing retailers have come and gone in the eight years the mall’s been open; people don’t want the same-old, same-old.
“Changing consumer behaviours, attitudes and technologies have drastically altered expectations for a shopping experience, and we are facing this trend head-on by transforming our mall assets into community hubs, with varied offers that service each of our communities’ specific whole-of-life needs and aspirations,” Skye Fisher, head of strategy at QIC Global Real Estate, a development firm with properties across the U.S. and in Australia, recently stated in Business of Fashion.
Bottom line
Retailers like Aritzia can still be successful at the mall, but they’ve got to be very selective about where they go. Experiential retail is where the industry is at this moment in time.
The winners, whether we’re talking the real estate owners or their tenants, will be those that deliver on the third-place experience. Cineplex is one of those; Aritzia, not so much.
