The “Retailtainment” Trend: No Signs of Slowing Down
as published by Park World Magazine, November 2019
It’s no secret that the face of retail is rapidly changing. America’s malls are facing the fallout from not just the rise of e-commerce but also an overabundance of retail space and changes in consumer behavior. As discussed in my Park World Magazine article from November 2018, mall owners have been testing entertainment and experience concepts as a way to fill vacant spaces, improve foot traffic, and restore viability.
While some malls are being converted into entirely new uses – such as distribution centers, multifamily properties, office and hotel space – others are wisely relying on experiential attractions to reinvent their space and create new value. According to Chain Store Age, spending on entertainment is projected to grow to nearly half of all discretionary spending by 2030, up from 33% in 1985. By appealing to consumers’ changing preferences for experiences over material things, entertainment-based attractions are enabling malls to take control of the shopper’s journey and become a destination for experiences.
A recent study by the International Council of Shopping Centers (ICSC) reported that from Q1 2010 to Q1 2019, the amount of entertainment square footage occupied by entertainment tenants grew 44.7% in mall settings. In terms of percentage growth, theaters (+27.9%) are being outpaced by two other categories: arcades/bowling/dining (+142.6%) and active entertainment (+450.8%).
The 27-year-old Mall of America in Minnesota, with its indoor amusement park, aquarium, escape room, mini golf courses, and countless other entertainment venues, is a model for retailtainment and innovation. In the past year the mall hosted more than 400 events, incorporated a variety of pop-up locations (including Instagram-worthy Candytopia), added an outdoor skating rink, and laid plans for an indoor water park.
American Dream in New Jersey, scheduled to open in October, will be the second largest shopping complex in U.S. and the third largest in North America, behind West Edmonton Mall in Alberta, Canada. It will house the largest indoor themepark in the Western Hemisphere, the largest indoor waterpark in North America, a 16-story ski slope, an NHL-regulation ice skating rink, a trampoline park, a rock-climbing wall, an aquarium, a Legoland Discovery Center, a 1,300-seat performing arts theater, and other attractions.
The shift toward experience-based retail is also happening at smaller regional malls and shopping centers throughout the U.S.
- In Baton Rouge, Louisiana, a Main Event facility opened at the site of a former H.H. Gregg store at the Mall of Louisiana. Main Event had previously sought to open at the nearby Siegen Lane Marketplace, but that site eventually went to a Topgolf location.
- On the site of a former Sears store at Brookfield Square mall in Milwaukee, a new entertainment complex featuring a two-story WhirlyBall venue and a BistroPlex cinema is scheduled to open in October 2019.
- In Crystal River, Florida, on the site of former Kmart store, a new 95,000-square-foot indoor entertainment center featuring rock climbing walls and electric go-karts is scheduled to open in 2020.
On a nationwide scale, Simon Property Group, America’s largest mall operator, announced the forming of a new partnership in June 2019 with Allied Esports. The two companies will collaborate to create gaming venues and production facilities for esports competition in select Simon malls nationwide.
Opportunity for Attractions Operators
Rising vacancy rates at regional malls represent a unique opportunity for attractions operators, especially in spaces once occupied by anchor stores and big box retailers. According to real estate research firm Reis, in the first and second quarters of 2019, the regional mall vacancy rate hit 9.3%, up from 9.0% in the fourth quarter of 2018 as large U.S. retail chains continued to close stores. Just weeks after announcing that 21 Sears and five Kmart stores will close in October 2019, for example, Sears’ parent company issued a statement saying nearly 100 additional stores will close by the end of the year.
While some mourn the closing of traditional retail outlets, others see it as a way to revitalize the regional mall and better serve their communities. Increasingly, mall developers are leveraging store closures as a means of creating engaging space with activities and attractions that consumers can’t get at home or at their computers. According to Michael Brown, a co-author of The Future of Shopping Centers study and partner at A.T. Kearney, malls will always have a retail component, but department stores will no longer be the main draw as owners make the transition from anchors to attractions.
A newly formed attractions company, Two Bit Circus, is betting that this trend has long staying power. Having opened its first futuristic micro-amusement park location in Los Angeles in 2018, the company has been meeting with mall developers throughout the U.S. to lease space for future locations. The indoor park’s size, at 30,000 to 35,000 square feet, was designed to purposely match a typical mall-tenant floorplate.
One challenge for mall owners is distinguishing long-lasting entertainment concepts from fads. Retail real estate analysts and industry experts agree that there is no one-size-fits-all strategy when it comes to reinventing mall spaces. Overcoming space constraints and high development costs associated with entertainment concepts are among the variables that developers and owners must navigate during the planning process.
Unlike retail tenants, a successful entertainment attraction is not about the product but the experience itself. From a consumer perspective, spending time on that experience must be rewarding and spending money on it must be worthwhile. Millennials in particular want quality experiences that are fun, unique, immersive, and social-media friendly. Entertainment operators many not necessarily produce huge sales densities themselves for shopping malls; however, when done right, they have the ability to drive foot traffic, extend dwell time, boost sales for other tenants, and create a vibrant destination experience for shoppers.
Given the inherent differences between retail and leisure, a well-designed feasibility study would be invaluable in determining whether these types of tenants would be a good fit for malls looking to reimagine and repurpose vacant space. Regardless of which direction malls decide to go, it’s clear that everyone – property owners, tenants, and consumers – will continue to adjust to an ever-changing “retailtainment” environment.
Nuresh Maredia is a hospitality consultant and appraiser for Hotel & Leisure Advisors. He has generated appraisals, market feasibility studies, economic impact studies, and hotel impact studies for a wide variety of leisure and hospitality property types. Nuresh’s expertise is in the evaluation of leisure properties, including hotels, waterparks, amusement parks, surf parks, and other leisure real estate. He has worked in management positions at a hotel and restaurant in Texas and has also helped operate and manage four independent hotels near Mumbai, India. Nuresh has consulted on some of the largest indoor waterpark properties in the United States. He has been a hospitality consultant since 2006, is a Certified General Real Estate Appraiser in Texas, and is a practicing affiliate with the Appraisal Institute. Nuresh heads our San Antonio office. He can be reached via telephone at 210-319-5440 or via e-mail at firstname.lastname@example.org. The author wishes to acknowledge Joan Deegan and Heidi Banak for their assistance with the article.