Here’s what’s in store for the declining shopping center industry • St Pete Catalyst

The number of shopping centers is likely to decline significantly over the next several years, and the real estate they occupy is expected to assume new characteristics as consumer buying trends change.

“We are at the start of what is a massive shift in commercial real estate from retail to industry,” said Rachel Elias Wein, Founder and CEO of WeinPlus, a strategy and management consultancy based in St. Petersburg focused on the retail, consumer and real estate sectors.

Rachel Elias Wein

Consumer spending, which includes both retail purchases and supply chains, has changed over the past 10 to 15 years, but the Covid-19 pandemic has accelerated the change, as retailers rethink the number of square feet they need to meet customer needs.

“More of that square footage is going to be added to the industry, and a lot of that square footage will come from the store. So we are seeing a shift from what has traditionally been referred to as retail store square footage to order and supply chain square footage, ”Wein said.

Wein expects this trend to emerge in Clearwater, as Westfield Countryside goes through the foreclosure process. The owner of the Uniball-Rodamco-Westfield mall has not made mortgage payments since May 2020 and owes his lender Morgan Stanley nearly $ 150 million, according to a lawsuit filed Dec. 29 in Circuit Court of Pinellas County. The lender has requested that a receiver be appointed to operate the property until it can be sold. Westfield Citrus Park in Tampa faces similar action.

While not commenting directly on local Westfield malls, Wein said malls nationwide have struggled.

“There are over 1,000 shopping centers in the country. If you had asked me five years ago, how many malls do we need, I would have said there were 200 to 400 malls that were on the bubble, ”Wein said. “Now, after the pandemic, for a given subway like the Tampa metro area, how many malls does that area need? We probably have close to a dozen malls and I just don’t think we need anything close.

“Essential retail”

There are several factors at work, including the demand for space for tenants in shopping malls.

“If I’m a retailer with 1,000 locations and 100% of them closed in April 2020, how many of them do I need to reopen? On my path to profitability, would I be better off if I only opened the top 30% or 50%? This is where retailers have to make these decisions individually, and then mall owners have to look at the decisions that retailers have made and say if enough of them have reopened to have a viable building that can handle the debt that they have. I have on that, ”Wein said. “More and more, this decision will be no. I don’t have enough tenants paying enough rent for me to pay my mortgage.

In addition, consumer spending has changed. In 2018, around $ 930 billion was spent on food outside the home in restaurants, or about 54% of total consumer spending on food. The remaining 46 percent of consumer food spending, about $ 780 billion, was spent in grocery stores.

But the pandemic has brought a massive shift and a shift in spending of around $ 200 billion. About $ 100 billion has gone from restaurants to grocery stores. Because it costs less to buy food at the grocery store, the remaining $ 100 billion that was previously spent in restaurants went into consumers’ pockets and was used for other retail purchases.

“We are seeing a reshuffle in retail. I think we’ll find that total retail spending will be similar from 2020 to 2019, but a lot of it will come from restaurants and a lot of it will go to general retailers and grocery stores, ”Wein said. “That’s why we’ve seen really big increases for Costco, Home Depot, Lowe’s, Target, Walmart, Publix, all ‘essential retail’, a term that didn’t exist before the pandemic. All of these people are doing exceptionally well.

Dumbbell impact

Wein makes a distinction between large, closed malls such as Countryside which for the most part lack “essential retail”, as opposed to luxury malls such as International Plaza in Tampa, and big box malls. and outdoor neighborhood. centers anchored by a grocery store.

“By far the success in the retail industry has been with outdoor retailers. They are more likely to be essential. They are more likely to have been open throughout the pandemic, ”Wein said.

Scale matters too. Larger retailers have been prioritized as supply chains have been squeezed, to the detriment of regional retailers. Mom and pop stores with one location and loyal customers also generally do well, Wein said, as the “shop local” mantra gains traction.

“You go to the big guy and you go to the little guy, and the ones who get hurt are the ones in the middle. If you are regional [retailer] with five to 50 pitches, these guys are really going to have a hard time, ”Wein said. “I see a bar where the bigger of the big guys are doing really well and the smaller of the little ones are doing well too… but the bigger sore spot is somewhere in the middle. And that’s where these shopping malls fit it. It’s not the discounts, the grocery store, or the place to go in the neighborhood, and it’s not the high-end malls. Because of this, they languish somewhere in the middle.

She now expects 300 or 400 malls nationwide to survive.

Malls in Cleveland, Boston and other communities have been turned into distribution sites for Amazon. It could also be happening locally, Wein said. Alternatively, the Clearwater site could become a combination of industrial and residential space, as the housing sector continues to grow in the Tampa-St. St. Petersburg region.

The pandemic and the growing acceptance of working from home and flexible office spaces has had an overall negative impact on larger metropolitan areas, but it has been positive for smaller metros, where people can easily telecommute, a- she declared.

“The cities that have a better quality of life, that have a lower cost of living, that have a fabulous airport, that’s where people want to be,” Wein said. “These things are largely positive for our region.”

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Peggy P. Gilmore