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Problems line up outside Detroit area’s closed malls amid coronavirus pandemic

Candice Williams
The Detroit News

The shopping experience at Metro Detroit malls will be much different after the coronavirus pandemic eases and doors begin reopening.

Retail experts say expect shorter hours and smaller crowds of wary shoppers, with stores offering to deliver merchandise curbside.

And there's a good chance the landscape will have changed: Some department store anchors and other retailers are expected to go dark. Malls that were in trouble before they were forced to lock their doors in mid-March now find themselves in even worse financial straits.

Starwood Capital Partners, the owner of The Mall at Partridge Creek in Clinton Township, is in default on a $725 million mortgage, according to commercial real estate research firm Trepp LLC.

The COVID-19 shutdown has hit traditional brick-and-mortar mall retailers hard: J.C. Penney sought Chapter 11 bankruptcy protection this month, and will close nearly a third of its stores, although it hasn't said which ones. J. Crew and Neiman Marcus also filed for bankruptcy this month; both could close stores. Officials with Macy’s — which already has abandoned many anchor locations, including some in Metro Detroit —  have said it will emerge from the pandemic a smaller company.

Even Nordstrom, considered by retail analysts as one of the more robust department stores, announced the closure of 16 stores nationwide this month and a corporate restructuring with job cuts. Its three Metro Detroit locations escaped the ax, but its Partridge Creek location in Clinton Township had already gone dark last fall.

This all comes following a recent nationwide study by retail analytics company First Insight found that malls ranked last among locations where consumers said they would feel safe shopping.

For retailers that survive, their brick-and-mortar presence might shrink, too, according to S&P Global Ratings.

“We believe the economic shutdown and lingering social-distancing behaviors will trigger a broad shakeout of retail as the industry will be forced to meaningfully reduce its physical footprint and rapidly evolve to reach the post-pandemic consumer,” S&P analyst Sarah E Wyeth wrote in a report this month. 

Goldstone said the most creative mall owners will integrate other uses into their properties, including self-storage, office space and residential units.

"In some communities where they don't have that forward vision, those are the assets that will be the most challenged," he said. "Because being creative is more powerful and more important than ever."

Slow rollout

Andy Parisi of Roseville might be typical of the average shopper when malls do reopen.

"I don't plan on going at first," he said. "I want to see what happens for a little bit. And if no huge spikes in cases, I will continue shopping."

Parisi recently did a Kohl's pickup order at Macomb Mall without coming into contact with anyone. 

At Somerset Collection in Troy, numerous stores are offering temporary curbside pickup.

At Somerset Collection in Troy, numerous stores including Nordstrom, Macy’s and Saks Fifth Avenue are offering temporary curbside pickup. That trend is expected to continue for months. 

"A lot of stores will respond by having shoppers bring merchandise to the car for the people that prefer, over the next three months or six months or whatever it is, to shop that way," said Ron Goldstone, executive vice president of NAI Farbman, a Southfield-based real estate firm.

"I think the smart retailers — Targets, your Kohl's, Home Depot, Lowe's, Walmart, Meijer, to name a few — have already started that. I think that direction will continue."

To make shoppers feel safer about returning, malls will need to increase cleaning and security measures to ensure people are practicing social-distancing guidelines, said Ronn Torossian, crisis management expert and CEO of New York-based 5W Public Relations.

“Business prior to COVID will not be the same as business after COVID,” he said. “COVID will forever change the world, and, of course, that will change retail and commerce.” 

At Great Lakes Crossing Outlet in Auburn Hills, owner Taubman Centers Inc. is preparing for when it can reopen to foot traffic. Maria Mainville, spokeswoman for Taubman, said the mall will open with shortened days at first. Other precautions include cleaning and disinfecting throughout the day, focusing on high-touch and high-traffic surfaces. Hand sanitizer will be available at designated stations and drinking fountains will be turned off.

“In all instances, we will continue to follow local, state and federal laws and mandates, and Centers for Disease Control guidelines, and we kindly ask tenant teams to do the same,” Mainville wrote in an email.

Troubled malls

"Even before the COVID crisis, the malls were heavily scrutinized and facing tons of problems,” said Manus Clancy, senior managing director with commercial real estate research firm Trepp LLC. “Even before March there were tons of malls that had either gone into default and had suffered losses or people were anticipating going down that path.”

Some malls in the Metro Detroit area have struggled for years, including Eastland Center in Harper Woods, which lost anchor stores Macy’s, Target and Sears in the past decade with no replacements.

More recently, at least two local malls have shown signs of financial trouble. Starwood Capital Partners, the owner of The Mall at Partridge Creek in Clinton Township, is in default on a $725 million mortgage that also includes three out-of-state malls, according to Trepp. Last fall's departure of Nordstrom was the second major anchor to leave the outdoor mall after Carson’s closed in 2018.

Fairlane Town Center in Dearborn has had financial troubles, with its owner — also Starwood Capital Partners — delinquent on a $136 million loan as it attempts to restructure debt.

Starwood declined to comment on its finances. Regarding reopening, officials with Starwood Retail said in a statement this week: "We are closely monitoring and evaluating all orders from state officials to determine the appropriate time when the mall can safely be reopened.”

Some local malls are expected to weather the storm better than others, including Great Lakes Crossing Outlet in Auburn Hills, Clancy said. The mall is at 95% occupancy and covers its debt service payment by two times. Its top anchor is Burlington Coat Factory and no tenant makes up more than 7% of its space.

"It should hold its own better than others," Clancy said. 

Earlier this month before Gov. Gretchen Whitmer extended the state's stay-home order until June 12, Lakeside Mall in Macomb County indicated plans to reopen June 1. No reopening date was listed on its website as of Monday.

Ophir Sternberg, CEO and founder of Out of the Box Ventures, owner of the Sterling Heights mall, said it offered rent relief to its tenants in April and May, dropping it by 60% to 70% for 60 days. The mall was at 75% occupancy pre-COVID-19.

So far no Lakeside Mall stores have decided to permanently close due to the pandemic, Sternberg said. "We certainly hope not, and that’s why we are trying to help as much as possible with the rent relief program," she said. 

Out of the Box Ventures, which acquired Lakeside Mall in 2019, still plans to expand beyond retail including a skating rink and events such as an automotive show in September and a pumpkin patch for October. 

"Many of our plans have been postponed for the time being until we have a clearer understanding of the pandemic and how that will affect holding group gatherings and events," Sternberg said. 

Accelerated change

The pandemic might speed up the movement of consumers toward nternet shopping, experts say. 

“I still think consumers in general still enjoy the shopping experience, still want to be social and go to the mall, look at things and buy things when they see it and when they want it, but I’m sure there are a lot of people during this challenge that are shopping online and realizing it’s easier than they kind of thought," NAI Farbman's Goldstone said. "It's an interesting acceleration in my eyes of something that has been happening."

Roseville resident Morgan Payne said she's turned to online shopping to get the things she needs and wants. It'll likely be a few months before she begins shopping in a mall again, she said. 

"I think malls should be the last thing to reopen because it will just be another place to help spread the coronavirus," she said. " There’s way too much of touching and not buying that happens in just about every store in the mall."

cwilliams@detroitnews.com

Twitter: @CWilliams_DN