Column: Shopping malls must adjust to new challenges

Keith Rubenstein

The digital age has presented mall operators in Detroit with their greatest challenge in a generation. Centers like Lakeview Square Mall that once dominated the local market are now rethinking their long-term plans as so many consumers across the region choose internet shopping over a trip to Macy’s, Sears or Kohl’s.

This is a nationwide issue that represents a sea change across the industry. As e-commerce takes more customers away from traditional retail, malls face the prospect of losing the foot traffic they need to remain financially viable. Operators are already developing new strategies for capturing consumer interest.

One of the most promising strategies calls for replacing anchor retail spaces with recreation, entertainment, and educational centers that give consumers unique, family-friendly experiences they simply can’t find or replicate on the internet. Data has shown that this approach is already emerging as a nationwide trend.

While overall shopping center space in America grew 0.8 percent over the past four years, space filled by apparel stores fell by around 3 percent, according to an analysis by the CoStar Group. Over that same period, there has been a robust 6 percent increase in the amount of large shopping center spaces filled by recreation and entertainment tenants.

Mall operators are starting to recognize they can create a crucial opportunity for themselves and their investors by repurposing a vacant department store into something fresh and new for consumers.

For example, as part of pursuing a re-creation-oriented strategy, General Growth Properties became the first American mall operator to sign a deal with KidZania, an experiential learning center for children that builds real-world skills in an engaging environment. This concept is a prime example of a business model poised to transform struggling anchor spaces into thriving hubs of activity that give millions of families a new and compelling reason to visit their local mall.

Where once stood racks of unsold merchandise, Kidzania creates a mini-city — complete with its own roads, buildings and currency — where children can role-play more than 100 occupations. Corporate sponsorships create a more authentic experience for participants — with name brands on every mini-city establishment — while also generating a sustainable revenue stream that keeps the space profitable over the long term.

Less than two months after launching into the U.S. market, Kidzania has already signed two anchor space leases and is actively exploring deals with other mall operators across the nation. Other recreation and entertainment venues are generating similar results because experts know this trend will only continue to gain steam.

The bottom line is that the new challenges facing retail do not need to mean the end of Lakeview Square Mall and other shopping centers nationwide. Like any other shift in the market, it is just an opportunity to find a new and better strategy for success.

Keith Rubenstein is acting CEO of KidZania USA.