Alexandria's Landmark Mall Languishes as General Growth Properties Struggles
Friday, July 3, 2009
This is what a dying mall looks like: Long stretches of vacant storefronts and blank walls. A department store with empty shelves preparing to shut down for good. A little boy running around the children's play area alone.
Landmark Mall in Alexandria is part of a growing list of ailing shopping centers across the country that have borne the brunt of the recession. Owner General Growth Properties unveiled ambitious plans five years ago to remake the 52-acre center into a suburban oasis of office buildings, homes and shops. But the process was dogged by delays, and now the financial crisis has delivered a triple whammy.
General Growth filed for bankruptcy protection this spring. The credit crunch has dried up the market for the $2 billion in capital required for the makeover. And consumers just aren't shopping, with the discretionary purchases that are the lifeblood of malls taking the biggest hit. Monthly sales at apparel stores have fallen an average of 6 percent compared with last year, while sales at department stores -- which typically anchor a mall -- have plummeted an average of 10 percent, according to the International Council of Shopping Centers, a trade group.
General Growth said it remains committed to overhauling Landmark Mall, and city officials are forging on with permits. But the timeline remains nebulous, and the aging shopping center waits in limbo.
"We are seeing some of these properties just sitting there where nothing is going to happen until there's capital back in the marketplace," said Michael P. Kercheval, chief executive of the ICSC.
The vision for Landmark involves tearing down the mall and replacing it with a 5 million-square-foot, mixed-use "lifestyle center" that mimics the feel of a town square, with shopping and restaurants next to offices and homes. There were 89 such projects under construction during the first quarter of the year, according to research firm CoStar Group, but only 18 traditional enclosed malls. Still, traditional malls dominate the landscape with more than 800 properties compared with about 300 lifestyle centers.
As the recession picked up steam, mall-based retailers got slammed. Shoppers slashed discretionary spending on clothing and entertainment at the specialty stores that line the walkways. The department stores that anchor malls suffered as consumers traded down to discounters. Retailers began shuttering stores -- or going out of business altogether.
Crabtree & Evelyn, which has 125 stores, filed for bankruptcy protection Wednesday. Whitehall Jewelers, Bombay Company and Sharper Image are just a handful of chains to liquidate their stores over the past two years, a total of 843 locations. Mall staples such as Ann Taylor, Talbots and Pacific Sunwear have collectively shuttered hundreds of stores. Other retailers are paring down expansion plans.
Strong malls such as Tysons Corner Center and the Fashion Centre at Pentagon City, where there are waiting lists for tenants to get in, were able to absorb the losses. But for mid-tier players such as Landmark, a store closing often ends in a dark, empty space.
Nationally, vacancy rates have risen from about 4 percent in 2006 to an average of 7.1 percent for regional malls, according to CoStar. Sales per square foot for non-anchor stores fell 11 percent in March, the most recent month for which statistics are available, according to the ICSC. General Growth does not disclose vacancy rates for specific properties. The City of Alexandria said vacancies at Landmark were "low" and estimated sales per square foot at $125 to $150, compared with the national average of $376, not including anchor tenants. Sales tax revenue from Landmark has plummeted to $1 million annually, down about 25 percent since it was first slated for redevelopment five years ago, the city said.
Landmark is already full of small-time tenants. The blinking sign at Mr. Mini Mart wishes shoppers a happy Ramadan. Alliance Dance Institute is home to the Alexandria Ballet and teaches adult ballroom classes. There is a dollar store, a wig store and a tobacco shop. Anchor Lord & Taylor is preparing to go dark.
General Growth said that when redevelopment plans were unveiled five years ago, Landmark prepared by no longer offering the long-term leases favored by national tenants. That plan has backfired as the makeover got put on hold. Sears, Macy's, Ann Taylor Loft and Victoria's Secret are among only a handful of national chains that remain.