At the University Heights shopping plaza in Providence a Boston Market
chicken restaurant and a BankBoston branch are thriving. A Coconuts
record store — next to the bank — and a Staples office supply store
also draw a steady stream of customers.
But in the midst of such healthy commercial activity a former Almacs
supermarket remains vacant, years after the company – losing a battle
against supermarket giants – closed its doors.
Blighted shopping centers are no rarity. In East Providence the first
thing you are likely to notice when you drive into the Wampanoag Plaza
at Pawtucket Avenue and Route 44 is a vacant restaurant – a former Red
Lobster – that sits in the middle of the parking lot.
In North Providence, an old Stop & Shop – the anchor of a shopping plaza
at 1525 Smith Street — closed in 1995, to clear the way for a Super
Stop & Shop that was opening a couple of miles away. The owners of the
property have yet to find a suitable tenant. Their latest proposal is to
lease the space to a Savers resale clothing outlet, but they are facing
opposition to that plan from town officials and some nearby residents
who have more ambitious expectations for the site.
At one end of the plaza that serves as home to Lincoln Mall, another
former Almacs property remains vacant.
Troubled shopping plazas are not a local phenomena.
Shopping center owners nationwide have seen a staggering loss of
profitability in the past decade as a result of store bankruptcies,
liquidations, mergers and acquisitions, according to a recent Simmons
College retail study.
According to a study published in the fall/winter Journal of Shopping
Center Research, shopping center owners lost an estimated $807 million
in profits from 1990 through 1997 due to bankruptcies, liquidations and
mergers in their department, discount department and large specialty
stores.
Professor Susan D. Sampson, head of the Simmons College Prince Program
in Retail Management, directed the study for the International Council
of Shopping Centers Educational Foundation.
“From the 1950s to the 1980s, shopping center owners were on top of the
world,” Sampson said. “But it’s no longer, ‘If you build them, they
will come.’ Shopping centers have reached a saturation point, and the
traditional female customer has a job and little free time to shop.”
Sampson said that successful shopping center owners faced with losses in
anchor tenants are finding creative ways to deal with the problem,
including replacing the tenant, repositioning the shopping center,
converting the center to another use, or completely redeveloping the
site.
Michael Beyard, vice president of strategic development at The Urban
Land Institute in Washington, D.C., sees a much different, but bright
future for American shopping centers.
“The shopping center isn’t going anywhere,” Beyard said. “It’s going to
metamorphose into a new environment. The cookie-cutter approach is a
thing of the past. The consumer is demanding diversity.”
Beyard is not surprised by the results of the Simmons College study.
“The retailing industry has never been tougher,” Beyard said.
“Competition has never been so great. The level of competition is
incredible and the demands of the consumer are changing rapidly.”
Those shopping centers that succeed, he said, are the ones that are able
to better integrate into the communities in which they exist. The most
successful shopping center owners, said Beyard, are creating hybrids
that match the specific desires of a community.
“They’re going to make themselves more like town centers and have more
than retailing in them,” he said.
The Simmons College study, said Sampson, was the first-ever look at the
cumulative effect of bankruptcies, liquidations, mergers and
acquisitions on the shopping center industry. Responses came from 55 top
shopping center owners across the country, representing thousands of
stores. The three most common shopping center anchor stores were
examined – department, discount department and large specialty stores.
Among the key findings of the study were:
Profit losses from bankruptcies and liquidations totaled $734 million
from 1990 through 1997, while profit losses from mergers and
acquisitions totaled $73 million. The areas hardest hit were in suburban
community shopping centers in the Mid Atlantic. Also hit heavily were
shopping center owners in New England, the Midwest, and the Southeast.
Eighty-seven percent of respondents have lost anchor tenants from
bankruptcies and liquidations since 1990. Sixty percent lost one to five
anchor stores, while 21 percent lost 11 or more anchor tenants. Half the
respondents had lost anchor tenants due to mergers and acquisitions.
Forty-seven percent of shopping center owners in the Mid Atlantic had
vacancies in their shopping centers due to bankruptcies and liquidation,
compared to 35 percent in New England, 37 percent in the Southeast, and
33 percent in the Midwest.
Only 18 percent of shopping center owners found it easy to replace
tenants.
Sampson’s study showed that a heavy period of bankruptcies and
liquidation is followed by a heavy period of mergers and acquisitions,
as health companies watch for bankruptcies and then move in and “cherry
pick” the best available spaces.
Shopping center owners can help protect themselves by quarterly
monitoring of stores’ sales growth, earnings, and number of store
openings and closings to catch negative trends early, Sampson said.
Catching those negative trends early – and planning ahead – may be the
key to prosperity for shopping center owners, Beyard said. Those who are
beating out the competition are doing their homework.
“They think strategically,” Beyard said. “They have people on staff who
are looking years ahead.”
