What's Next for Malls?

We took a look at two successful American companies who seem to be getting it right when it comes to shopping centers.
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We took a look at two successful American companies who seem to be getting it right when it comes to shopping centers.
Westfield Topanga. Photo: Westfield

Westfield Topanga. Photo: Westfield

For many years, the shopping center model was simple: Shoppable product was of paramount importance, and distractions were kept to an extreme minimum. Food courts consisting of high-calorie snacks and convenience meals existed only so shoppers could quickly consume the needed calories to continue their purchasing excursion; outside of those, little (if any) seating could be found. The mall was essentially a mausoleum — an enclosed labyrinth with no windows and thick, concrete walls to shield the shopper from the great outdoors.

But in a world where shopping is but a click away, this kind of bland ecosystem no longer works. According to the United States Census Bureau, in 2016, approximately 90 percent of commerce is still done offline. But still, malls have died, fallen into decay and disrepair, often at huge detriment to the economies of the cities in which they operate. This past May, retail analyst Jan Kniffen told CNBC that a third of American malls currently in existence will eventually disappear.

However, that's not to say that the mall, as a concept, is facing extinction; and a few of the country's shopping centers have figured out how to make it work in today's rapidly evolving retail landscape — namely by thinking differently about the experiences people want to have when they go offline and venture outside their homes.

Two noteworthy examples are Westfield and, to a smaller extent, Caruso. Both companies have shopping centers that have not only managed to survive, but thrive. Westfield is behind the Oculus at the World Trade Center in New York City, Topanga (the site of Kylie Jenner’s first Kylie Lipkit pop-up back in December) in Southern California, Garden State Plaza in New Jersey and a work in progress in Los Angeles's Century City. Caruso is known for The Grove in LA and Americana at Brand in Glendale, Calif. – both of which have consistently been among the top 15 performing malls in the country according to real estate analysts Green Street Advisors. (The Grove is number two). Fellow exceptions to the "malls are dead" trope include several Simon properties like Woodbury Commons, The Mall at Rockingham Park and The Forum Shops at Caesar's Palace, as well as Miami's Bal Harbour Shops (read more here), but we've chosen to focus on two companies whose innovative approaches to shopping offer some indications about the mall's overall future.

Westfield Topanga. Photo: Westfield

Westfield Topanga. Photo: Westfield

Despite similar successes, Westfield and Caruso differ greatly when it comes to brand identity. Where Westfield is grandiose, Caruso is quaint. Where Westfield still retains the structure and ethos of the mall, Caruso would be insulted if you ever described its shopping centers as such; "town center" is its preferred phrasing.

Plus, these two major mall purveyors are sworn enemies. As such, it is likely that both would object to being compared to one another. But, in the profitable and wealthy Southern California especially, both Westfield and Caruso have done phenomenally well (most of Westfield’s top-performing malls are located there), creating an "arms race" of premium shopping centers. Of course, some of this may owe to the region's mild weather. "[Our properties] having an outdoor environment certainly helps because I feel like people here want to be outside, especially in Los Angeles," says Jackie Levy at Caruso.

The company strategy at Westfield is, according to Peter Gold at Shop.com, is "to develop superior retail destinations by integrating food, fashion, leisure, entertainment. And using technology to better connect retailers with consumers." Caruso is more focused on what it refers to as "guest experiences.” It's how the company defines who it is as a business. As Jackie Levy, the executive vice president of operations told me, "we classify ourselves as a hospitality company." So much so, in fact, that Caruso is currently working on building its first hotel and resort in Santa Barbara, the Miramar Resort.

Caruso is a privately owned company founded in 1987 by Rick Caruso after he purchased a retail building that housed a Loehmann's. By 1996, Caruso opened the Promenade at Westlake in SoCal's Thousand Oaks neighborhood (aka "The Valley"). The Promenade was unique at the time — a meandering complex with a range of stores defined by its beautiful landscaping. Though it was more "strip mall" than suburban mall; the outdoor nature of the Promenade was an incipient technique that would later inspire his most successful venture: The Grove.

The Grove. Photo: Sasha Boghosian/Caruso Affiliated

The Grove. Photo: Sasha Boghosian/Caruso Affiliated

The Grove, which opened in 2002, is perhaps Caruso's most well-known property. It consists of vaguely Mediterranean-style retail facades, a farmer's market, a lake with a dancing-fountain show, a grassy space with free blankets handed out so visitors can lie out in the sun (or under the stars) and an old-timey trolley that runs through the entirety of the premises. It feels as if you landed on a movie backlot or perhaps even a meticulously crafted Disneyland attraction.

This is not a coincidence; according to The Hollywood Reporter, Caruso aims for a cinematic quality in his ventures, thus making them not just places to shop, but also tourist spots in which to relax and unwind. As he told a crowd at the National Federation BIG show in 2014, "We don't design our properties for people to shop... But for people to enjoy. And when they feel good, they do shop. And they spend more. The reason these places work is simple: They mimic the natural habits of human behavior. We try to put people into social settings that are organic."

Westfield has an entirely different origin story. It's an Australian mall that impressively managed to infiltrate and dominate the American market. In 1959, during the heyday of the American suburban shopping mall, John Saunders and Frank Lowy co-founded Westfield Plaza – a shopping center in Blacktown, Australia, on the fringes of Sydney. It had 12 specialty shops, two department stores and a supermarket. By the end of that year, it became the center and the backbone of Blacktown's commercial hub. Soon after, Westfield went public on the Sydney Stock Exchange.

In 1977, after a meteoric rise and several acquisitions within Australia, changing overseas regulations allowed Westfield to acquire its first shopping center in Trumbull, Connecticut. By 2002, Westfield had acquired another 23 shopping centers, bringing its total number of American malls to 55, making the U.S. Westfield's biggest market. Seeing the branding opportunity, each one was labeled a "Westfield" shopping center and the glaringly red, gothic, italicized logo adorning the side of every location. 

In 2014, the company restructured, creating two entities: Scentre Group encompasses Australia and New Zealand, while Westfield Corporation oversees malls in the U.S., the UK and, currently in development, Milan. By restructuring the company, a Westfield upped its focus on the U.S., and it began selling off its smaller centers with poor performance to focus on bigger ones in densely populated cities.

The Oculus. Photo: Westfield

The Oculus. Photo: Westfield

The Oculus, a spindly building that resembles the sun-bleached carcass of an ancient Comura, opened this past August in lower Manhattan. Its structure, with articulated beams that refracts sunlight across the white linoleum tiles, is quintessentially New York: innovative, modern and wholly urban. Unlike most malls, the Oculus is anchored not by a department store, but by famed Italian marketplace Eataly and an Apple store. And, despite being in operation for a mere six months, it has already helped the company exceed expectations; Westfield is expected to "outperform the market" according to investment analysts polled by the Financial Times earlier this month.

Over on the West Coast, Westfield Topanga is an extremely successful example of how redevelopment can not only increase the size and footprint of a shopping center, but also change its character so as to attract even more shoppers. Topanga is one of the few "mall" malls that have integrated indoor-outdoor spaces — specifically with the introduction of its "Village." With a weekly farmer's market, a trolley and park-like kids play areas, Westfield Topanga Village is a vague, if not outright, copy of Caruso's Grove and Americana shopping centers.

Westfield's success can also be attributed to the ways in which it operates like a startup. It has a division dedicated solely to the integration of technology, Westfield Labs. Just last year, Caruso countered by opening its own Strategic Development and Innovation division. Its upcoming Palisades Village project, set to open in the summer of 2018, will serve as an incubator and testing ground for the new technologies developed there. Both Westfield and Caruso also created apps to streamline the shopping experience, with features like the ability to pre-order food from restaurants, loyalty programs, a directory that moves with you (i.e. mall GPS) and a concierge that delivers purchases to your car or home.

Both companies have also thought further outside the box in terms of entertainment and engagement: In February, Rebecca Minkoff hosted her Spring 2017 fashion show at the Grove, using hashtags to promote the event. In August of 2016, Westfield acquired the Tony award-winning Scott Sanders Theatrical Productions; in the corporate announcement, Peter Lowy, Westfield's co-CEO, wrote at the time, "Live events and entertainment have always been critical to Westfield, and Scott will provide a new dimension to our approach and help us further our engagement with our consumers."

Entertainment isn't limited to shows and events; it includes partnerships that bring in unique experiences, like gaming. In Westfield Garden City Plaza, near Paramus, New Jersey, ESC Games recently opened up a game theater: a freestanding structure where players, guided by an energetic emcee, use their consoles to play games projected onto a movie theater-sized screen.

The Oculus. Photo: Westfield

The Oculus. Photo: Westfield

On a recent Thursday, I observed as 30 teens from a local high school arrived at the theater looking vaguely bored; but eventually, the energy shifted. They became engaged and absorbed in the game; a competitive air filled the arena as winners high-fived each other and losers shrugged in defeat. When it was all over, nearly everyone was smiling.

The mall business is certainly not out of the woods. It is hardly a propitious time to be in the brick-and-mortar business. But for companies like Caruso and Westfield who are forward-thinking and who embrace technology rather than fear it, there may be a future. "Disruption can be scary. Change can be scary," explains Steven Lowy, co-CEO of Westfield, in a video on Westfield Labs’s homepage. "What has made Westfield successful over more than 50 years in many countries is this vision that you continually need to adapt."

Homepage photo of Americana at Brand: Caruso

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