By Ylan Q. Mui
Washington Post Staff Writer
Friday, July 3, 2009; A16
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.
Ahkeibo Blake has worked as a barber at Touch Up Hair Gallery at the mall for over a year. He said his weekly pay has dropped from $1,700 when he started to about $600. He has noticed that the mall is less crowded, and his clients are stretching the time between their appointments -- and scaling back on services once they do come in.
But Blake said he doesn't blame them for not coming to the mall. He lives across the street, but he rarely shops at Landmark. Instead, he drives to Maryland for a shopping center with a Dave and Busters. During lunch, he leaves the mall and its meager food court for takeout elsewhere.
"It's a very good place, but they have the wrong businesses in here," he said.
Alexandria officials have not given up hope of turning Landmark into a shopping destination. It has a prime location just off Interstate 395, where more than 294,000 cars pass the mall every day, according to General Growth. The company reports that household income within the trade area is $104,259, compared with the national average of $50,233. Nearly 300,000 people work within a five-mile radius of the mall, and the upcoming military base realignment and closure program is expected to bring 6,400 new jobs to the area, according to the city.
The problems, however, are capital and competition. Landmark hasn't been renovated since 1990. Meanwhile, upscale developments in Clarendon, Pentagon City, behemoth Tysons Corner and General Growth's own upscale Tysons Galleria have siphoned away potential customers. Speculation abounded that General Growth might sell Landmark as part of its bankruptcy reorganization, but a company spokesman said that was unlikely.
"Landmark Mall occupies a valuable piece of property in a wonderful location. The potential for that property is tremendous," spokesman Jim Graham said. "Our restructuring and current market conditions both make it difficult to commit to a specific timetable, but we are hopeful that we can work with our retail partners and the City of Alexandria to make the reinvention of Landmark Mall a reality."
Last month, the City Council approved another phase in the plans to redevelop Landmark and the surrounding neighborhood. But Deputy City Manager Mark Jinks is also realistic. A plan summary presented to the council last month noted that the current economic environment could not support such massive redevelopment. Jinks said instead that the city is focused on clearing regulatory hurdles in hopes that it will be ready for a rebound in the capital markets -- and a turnaround at General Growth.
"We're hoping that it is a high priority," Jinks said of General Growth's commitment to Landmark. "Whether it is or not will depend on what kind of company emerges from the restructuring."
But the city seems to be hedging its bets. Jinks said his team has been in preliminary talks with other developers and investors, but declined to specify which ones. The city is determined to bring the site back to life, he said, with or without General Growth.