Business

Saturday, Jan 16 2010 12:00 PM

Malls can't take customers for granted as new outdoor centers pop up

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    By Henry A. Barrios

    Henry A. Barrios / The Californian A few people stroll inside of the East Hills Mall which is mostly empty of shoppers on the last shopping day before Christmas.

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    By Henry A. Barrios

    Henry A. Barrios / The Californian The Northwest Promenade is thick with vehicles and shoppers making their last minute purchases on the last shopping day before Christmas.

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    By Henry A. Barrios

    Henry A. Barrios / The Californian Shoppers at the Northwest Promenade make their last minute purchases on the last shopping day before Christmas.

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    By Henry A. Barrios

    Henry A. Barrios / The Californian A group of pigeons have free reign to peck out a meal in the mostly empty parking lot of the East Hills Mall on the last shopping day before Christmas. The mall has been struggling to survive after losing its biggest tenants over the last few years.

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    By Henry A. Barrios

    Henry A. Barrios / The Californian The parking lot at the Northwest Promenade is thick with vehicles as people do their last minute shopping before Christmas.

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BY COURTENAY EDELHART, Californian staff writer cedelhart@bakersfield.com

Ryan Dodson isn’t a fan of shopping malls. Loading diapers, groceries and other staples into his car in a Costco parking lot, the 31-year-old father said he rarely shops at Valley Plaza, the largest of the city’s enclosed malls.

“It’s expensive and I don’t like the crowds. It’s like a hangout for teenagers and gangbangers,” he said. “I don’t want to deal with that. You don’t want your kids to see that.”

Whether that’s a fair characterization is open for debate, but it’s become obvious that malls — once the center of the retail universe — can no longer take customers for granted.

The traditional model of an enclosed mall with department store anchors is out of fashion, some experts say. The newest retail developments are almost always outdoor lifestyle centers that rely on movie theaters, restaurants and other entertainment to draw traffic.

Traditional models still carry success, said Nicole Spreck, spokeswoman for the Chicago-based General Growth Properties, which owns the Valley Plaza. The Ming Avenue mall has a 90 percent occupancy rate — above the average, she added.

“The traditional enclosed shopping mall is in no way threatened by outdoor lifestyle centers,” she said. “In fact, outdoor lifestyle centers are simply an extension of the traditional shopping mall.”

Malls are a clean, safe, family-friendly shopping experience, and many shoppers still prefer to visit stores under one roof with heat and air conditioning, Spreck said.

However, the Marketplace, built in southwest Bakersfield in the mid-1990s, is thriving; the mixed-use Bakersfield Commons development project in west Bakersfield includes plans for an open-air shopping district; and the Shops at River Walk under development in southwest Bakersfield is an outdoor concept, too.

And owners of the city’s two largest indoor malls are operating under bankruptcy protection. Both are to some degree victims of the real estate collapse.

In the case of East Hills Mall, residential development that had been planned for land east of the mall didn’t materialize, and to add insult to injury, every one of the northeast Bakersfield mall’s anchors went out of business in a recession that very few saw coming.

General Growth Properties had a different issue.

As real estate values were rising, the owner of Valley Plaza leveraged many of its holdings to fund expansion. When the market tanked, it found itself unable to repay bondholders.The nation’s second largest mall operator is looking at a range of alternatives to reduce its debt, including possibly selling itself to a competitor.

East Hills owner BH Mall LLC has said it wants to keep its 178,000-square-foot mall and make improvements there, but it’s likely to have a hard time obtaining financing because the mall has a high vacancy rate and has had to drastically lower rent to keep its remaining tenants.

“I almost never come to this mall because there’s nobody here and I probably won’t find what I’m looking for,” said Damon Davis, 22, as he strolled through one of the mall’s more deserted corridors.

The head of BH Mall, Nick Danesh, referred questions about East Hills to property manager Anne Lynch, who did not respond to repeated requests for an interview.

Valley Plaza customers Frankie and Kathy Reyes say malls are just right for local shoppers.

“I love the mall,” Kathy Reyes said after enjoying lunch in the Valley Plaza food court. “It has everything here in one place. You don’t have to drive all over the place.”

Frankie Reyes said he doesn’t find the presence of teenagers intimidating.

“I feel safe,” he said.

Some important retailers are betting those loyal shoppers will keep coming.

The vast majority of Los Angeles-based clothing store chain Forever 21’s 453 locations are in malls, and it recently began opening larger-format stores in some of the anchor spots opened up by the bankruptcy of Gottschalks, including the one at Valley Plaza.

An expanded Forever 21 store opened there in November, undaunted by the recession.
“We find that good malls have always remained strong, whereas weak malls have gotten worse,” said spokeswoman Kirstin Nagle.

George Whalin of Retail Management Consultants in Carlsbad calls talk that malls are dinosaurs “nonsense.”

“If it’s an outdated model, why are there two-year waiting lists to get into select malls in certain markets?” he said.

When malls fail, Whalin said, it’s for the same reasons individual stores fail.

“They don’t make investments and let the property go down,” he said. “Or they fail to keep their offerings fresh, or pick a bad location, or somebody else nearby does what they do better.”

Well-run malls in premier locations are still an important part of the retail landscape, Whalin said.
Kirsten Potegian, co-owner of the Ben & Jerry’s ice cream franchise at East Hills, said she couldn’t have foreseen that East Hills would lose all its anchors when her eatery opened up there 16 months ago.

“That certainly hurt us,” she said.

But Potegian said malls are still the place for an ice cream shop to be, and she has no regrets.

“We need the foot traffic,” Potegian said. “We’re an impulse buy. You don’t see too many people driving across town to get a scoop of ice cream.”

Danny Villa manages Stylz, a shop in East Hills that sells an eclectic mix of clothes, skateboard gear and automotive accessories.

Villa said he thinks malls in general are perfectly viable business models, but he’s uncertain about the future of East Hills since Gottschalks and Mervyn’s closed.

“I never realized how much anchor stores bring to a mall, but they’re pretty important,” Villa said. “Everyone here is concerned.”

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