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Lack of Shoppers Forces Malls to Cut Hours

By Ylan Q. Mui
Washington Post Staff Writer
Wednesday, February 25, 2009

Two major shopping center developers are reducing hours of operation at malls across the country -- including three in the Washington area -- as the retail industry struggles to adapt to the severe drop-off in traffic and consumer spending.

Westfield Group said the shorter hours will take effect next week at most of its U.S. shopping centers, including Montgomery, Wheaton Plaza and Annapolis malls. Those centers will change weekday hours to open a half hour later at 10:30 a.m. and close a half hour earlier at 9 p.m. On Saturdays, they open at 10 a.m. as usual but close a half hour earlier at 9 p.m. Sunday hours are unchanged.

Simon Property Group moved up the weekday closing times at 17 malls in New England by a half hour in January. Those centers also open an hour later on Sundays. Last week, it announced that three malls in Pittsburgh also would close early. None of Simon's properties in the Washington area, which include Leesburg Corner Premium Outlets, Potomac Mills and Arundel Mills, is affected.

"It's absolutely unusual," said Bernard J. Haddigan, a senior vice president and managing director at Marcus & Millichap who helps analyze and finance shopping center developments. "This is clearly a defensive strategy."

Shopping centers are caught in a bind driven by the steep pullback in consumer spending: Lower sales have forced many mall tenants to close stores, leading to higher vacancy rates and lower foot traffic, which further drives down sales.

National chains that have announced store closings include Ann Taylor and Pacific Sunwear-- staples of the malls. Other retailers, such as Whitehall Jewelers and KB Toys, have filed for bankruptcy protection.

Malls' large anchor tenants also are taking a beating. Macy's yesterday said profit dropped 59 percent during the fourth quarter. Nordstrom reported that earnings fell 68 percent to $68 million. J.C. Penney said last week that its fourth-quarter profit fell 51 percent.

Shopping centers have not fared much better. Nationally, sales per square foot of non-anchor tenants plunged 11 percent to $374 last year, a six-year low, according to the International Council of Shopping Centers, a trade group. Mall vacancy rates have risen about 1 percentage point over the past year to 4 percent, while the total retail vacancy rate grew to 6.7 percent.

"One of the big things with shopping is always convenience," said Matthew Winn, managing director of retail consulting at Cushman & Wakefield. "You have to match your business to what your store hours are going to be."

Earnings at several major mall operators have dropped during the last fiscal year. Late Monday, General Growth Properties said its fourth-quarter core funds from operations fell nearly 15 percent from the corresponding period a year earlier. The owner of Tysons Galleria and Landmark Mall blamed the slowing economy for declining rental income.

Ken Gillett, senior vice president of property management at Macerich, said the company is examining operating hours but has no plans to adjust them yet. The developer, which operates Tysons Corner Center, is analyzing hourly traffic patterns and sales and discussing the issue with retailers, he said.

"Shoppers really get used to certain shopping patterns," Gillett said. "We don't like to make radical adjustments without a lot of thought."

At Simon Property, spokesman Les Morris said hours are determined by the market and that the company will continue to evaluate operating times.

Westfield spokeswoman Katy Dickey said the developer broached reducing hours with retailers early this year and that the response was positive. She said the move would not affect groups such as mall walkers and that department stores would continue to set their own hours.

The purpose was "to help our retailers save, conserve resources and respond to changing consumer demand," Dickey said.

Omar Khaldieh said he doesn't mind opening and closing his men's clothing store, Milano, a bit earlier. Traffic at his shop in Wheaton Plaza Mall has been light in the mornings, and even slower in the evenings, he said. He has cut his staff from four to two employees.

Khaldieh said he hopes the reduced hours will help him "control expense and to be able to sustain the survival of the business."

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