East Valley mall owners are in a tough position. The days of freewheeling consumerism are gone. Shoppers are dodging high-end department stores, in favor of marked-down discount shops. As a result, mall vacancy rates spiked. Many retail chains shuttered stores or fell into bankruptcy, leaving mall owners without rent and looking to fill empty retail space.
East Valley mall owners are in a tough position.
The days of freewheeling consumerism are gone. Shoppers are dodging high-end department stores, in favor of marked-down discount shops.
As a result, mall vacancy rates spiked. Many retail chains shuttered stores or fell into bankruptcy, leaving mall owners without rent and looking to fill empty retail space.
Earlier this month, the nation's second-largest mall owner, General Growth Properties, filed for bankruptcy protection. Sagging retail sales and frozen credit lines were too much to bear. The company said it wasn't capable of refinancing its $3.3 billion debt-load.
East Valley mall developer, Westcor, knows their pain. The company, which is owned by Macerich Co., is also highly leveraged, owing hundred of millions in loans, according to financial disclosure filings.
However, it has been able to refinance and extend its loans and believes it will continue to draw consumers.
"We are actually excited in tough economic times like this," said Kim Choukalas, Westcor's vice president of leasing. "It gives us an opportunity to be forward-thinking."
Westcor malls include: Chandler Fashion Center, Gilbert's SanTan Village, and both the Fiesta Mall and Superstition Springs Center in Mesa.
Choukalas said the company has seen "a lot of movement" among its mall retailers within the past 12 months. To deal with the changes, Westcor has had to shuffle its stores and redevelop its centers.
In the past year, U.S. retail sales have plummeted almost 10 percent. Because of this, stores with a major mall presence like Linens 'n Things, Mervyn's, and Circuit City, have filed for bankruptcy and pulled out of malls. Other retailers, including Macy's, have also closed down stores. Westcor faced a Macy's closure at Fiesta Mall in late 2007, when it merged with Robinsons-May. Westcor demolished the Macy's building and replaced it with a new 100,000 square-foot structure that now houses Dick's Sporting Goods and Best Buy. The stores opened earlier this year.
It was a clean break from the past, Choukalas said.
"We are continually looking to enhance our centers," she said "The mall format will always be an art work in progress to us."
Westcor's stores aren't the only draw for consumers. It has pursued another strategy, as well: entertainment.
Westcor put in the state's first double-deck carousel at the Superstition Springs Center. And so far this month, the Chandler Fashion Center has hosted an azTeen magazine model call and a Titanic exhibition, which brought in more than 8,000 people.
Westcor is not alone. Malls throughout the country are reaching out to consumers in new ways.
Developers haven't had much of a choice. Nationally, vacancy rates at malls hit 7.9 percent in the first quarter of 2009, according to Reis, a New York-based real estate research firm. This is the largest number recorded by Reis since the company began publishing quarterly figures in 2000.
Victor Calanog, Reis' director of research, said he expects mall vacancies to maintain high levels until 2012. The conditions, he said, is "truly symptomatic of the pullback in consumer spending and low levels of both consumer and investor confidence weighing down most sectors of the US economy."
Bob Kammrath, a Phoenix-based retail and real estate analyst, said investor confidence is exceedingly low. He said loans in the commercial market are down around 40 percent.
If businesses can't get loans, there will be more closures and fewer retailers capable of moving in.
"You just can't open a store right away, you need financing," he said. "And banks aren't lending now."
Kammrath believes that the indoor mall industry as a whole is "dead."
He isn't the only one. There is a Web site following the trend called DeadMalls.com. It tracks "first-hand the demise of many of ... (the) great giants of retail."
But Kammrath has not written off Westcor just yet. He said the company's recent moves might prove fruitful.
"They might start a renaissance," he said. "We'll have to see. Maybe that'll get everything going again."