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August 2017 — Retail Properties Quarterly — Page 27
buying homes, having children and
doing activities that lead to the
acquisition of goods – meaning a
potential increase in shopping. As
millennials continue to trend toward
experience-based spending, they will
require a different kind of gathering
center than the traditional suburban
mall their baby-boomer parents fre-
quented.
As a result of this new demand,
malls have rolled with the punches
by finding new tenants, alternative
uses and redesigning their spaces to
appeal to the shifting demographic.
The advantages of regional malls
are too good to pass up – namely,
they are conveniently located to
consumers, offer ample parking and
often have large space blocks that
are unavailable in other venues.
Several traditional malls in Colorado
have already made the transforma-
tion into community destinations,
including Belmar, Streets at South-
Glenn, Twenty Ninth Street, Gardens
on Havana and Foothills.
These transformations often
include shifting from enclosed
hallways to open-air spaces that
bring in natural light, incorporate
pedestrian walkways and focus on
community gathering areas. Sleepy
department stores, record stores,
trendy apparel chains and novelty
stores are being replaced with fresh,
high-energy concepts. Entertain-
ment users such as Jump Street,
Round One and movie theaters as
well as fitness users including Colo-
rado Athletic Club, 24 Hour Fitness,
boxing and rock climbing gyms are
all benefitting from the recent churn
in tenancy.
It is anticipated that regional malls
will continue to experience more
closures from anchor tenants. Con-
trary to popular belief, this can be
positive news for the properties, as
many of the pending closures are
tenants that bring limited value to
the community and mall owners. As
mall owners regain control of this
space, there will be an increase in
traffic-generating uses, namely more
entertainment as well as fitness,
office, medical and community uses.
The successful conversion to alter-
native uses depends greatly on the
surrounding demographics, foot
traffic and potential rental income.
In many cases throughout suburban
America, a repurposed mall may far
exceed value as conventional retail
space. Although one thing is certain:
The regional mall in Colorado is far
from being extinct. It is evolving
into a new type of gathering place
that meets the needs of its changing
communities. ▲
These statistics are only a few facts
that are emblematic of a much larger,
systematic problem: saturation.
There are far more stores and shop-
ping centers than there are people,
and the effects of this tremendous
volume are finally catching up with
the retailers themselves. Due to the
overabundance of stores, each is seiz-
ing sales from another, to the extent
that very few businesses are mak-
ing enough money to justify keeping
their doors open.
While the situation appears dire, in
fact, a type of natural selection is tak-
ing place. Retailers are closing their
doors, developers are embarking on
fewer projects and, eventually, what
will remain is the proper number
of stores. However, this is not to say
that developers need to wait out the
retail crisis twiddling their thumbs;
instead, they need to adjust their
mindsets. The traditional mall or
basic shopping centers are no longer
models for success. Developers need
to focus on transit-oriented develop-
ments and mixed-use projects that
include housing, offices and hotels.
Developments such as these will
provide built-in consumers, allow-
ing retailers to grow a stronger, more
consistent customer base. The future
appears bleak with many businesses
shutting their doors, but this is not
the end of retail, it is merely a harsh
restructuring.
Yes, many malls, shopping cen-
ters and companies will go under
in the coming years, but what will
that leave behind? Healthy survivors
and optimistic developers who will
emerge from the ashes of retail’s past
and characterize the future of the
retail economy with fresh ideas and
new concepts.▲
Thiel
Zall
However, it recently was reported
that approximately 324 departments
stores consisting of up to 37 million
square feet are scheduled to close in
the next couple of years. Although the
grocery sector has continued to grow,
some national chains are experiment-
ing with smaller formats.While some
of this available anchor space will
be leased to other tenants with sub-
stantial size requirements, such as
gyms, entertainment centers, music
venues and schools, other anchor
space will need to be divided and
leased to multiple tenants. As the
retail sector continually changes,
landlords will want maximum flex-
ibility to reconfigure and revitalize
their projects, with or without an
anchor tenant.
To the extent possible, co-tenancy
provisions should be deleted entirely
or tied only to a certain percentage or
number of retail stores that are operat-
ing. If the project includes nonretail
uses, then any nonretail space should
be excluded from the co-tenancy deter-
mination.
In conclusion, landlords and ten-
ants are being faced with a new set
of expectations and obligations when
negotiating retail leases. Although this
article has focused on typical lease
provisions that are being updated or
replaced, the changing retail land-
scape likely will generate a number of
unique lease provisions for new retail
developments.▲
Meek
SRS Real Estate Partners
Tony Pierangeli • Jim Hoffman
Joe Beck • Brian Hollenback • Austin Tillack
Tami Lord • Molly Bayer
SullivanHayes Brokerage –
Boulder
Michael DePalma • Sean Kulzer
David Dobek
SullivanHayes Brokerage –
Denver
Tom Castle • Chris Cook
Courtney Dahlberg Key • Mark Ernster
Mike Kendall • Emily Klimas
John Liprando • Grant Maves
Brian Shorter • Christopher Anton
Josh Burger • Bryan Slaughter
Mark Williford
Tebo Development Company
Stephen Tebo • George Levin
The Zall Company
Stacey Glenn • Stuart Zall
Trevey Land and Commercial
Mitch Trevey • Nick Nickerson • Jason Thomas
Unique Properties Inc.
Marc S. Lippitt • Scott L. Shwayder
Tim Finholm • Brad Gilpin • Phil Yeddis
Gannon Roth • Allen Freedberg
Samuel Leger
W.W. Reynolds Companies, Inc.
Chad Henry • Nate Litsey
Marty McElwain
WalderaScott Real Estate
Partners
Kimberly Waldera • Noah Waldera
Scott Nannemann • Paul Klink
Western Centers Inc.
Brian Pesch • Corey R. Wagner • Bill Singer:
Western Investor Network
Tony Hemminger • John Jumonville
Matt Ritter
WestStar Commercial
Tim Hakes • Kevin Hayutin
Michael Hayutin • Stephanie Keyes
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