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An expansive water park, one of the main features of a newly opened mega-mall in New Jersey.
The Dream Works Water park at the American Dream mall located in East Rutherford, New Jersey on December 19, 2019.
AFP via Getty Images

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Dying malls seek second life as entertainment destinations

As Americans increasingly shop online and stay at home, can malls find new community appeal?

Les Sandler has seen the future of the American mall, and it involves blacklight mini golf courses, archery tag (foam-tipped arrows, don’t worry), and interactive batting cages.

Sandler and his son Jonah run Scene75, a Dayton, Ohio–based company that’s found a niche in the new retail economy renovating old warehouses and big box stores to create massive entertainment centers. Since launching in 2009, their company has transformed furniture warehouses, former Kmarts, and other retail real estate into family-friendly venues filled with attractions and games.

The company’s newest location, which opened last October at the Tuttle Crossing Mall in Columbus, Ohio, converted a former Macy’s store into a 224,000-square-foot indoor entertainment center filled with go-karts, arcade games, and rides. The chain’s existing locations in Cincinnati, Dayton, Cleveland, and Pittsburgh welcome roughly 250,000 to 500,000 visitors a year per location, Sandler says, and Scene75 is looking to expand, weighing several new sites across the Midwest.

“Mall developers are trying to use entertainment and restaurants as the new anchor tenants,” says Randy White, CEO of White Hutchinson Leisure & Learning Group, a consulting firm focused on location-based entertainment. “Today, it’s about real-life socialization. Potential shoppers can have all the digital entertainment experiences at home.”

An entertainment renaissance

For years, analysts have talked about the retail apocalypse, and how in an e-commerce age, the future of malls would be around an experience economy: food halls, “fitness clusters” of gyms and spas, programming, and other events that give online shoppers a reason to show up in person in their communities. Many commercial landlords and mall owners have responded, introducing pop-up shops and events, yoga classes, and other means of attracting foot traffic such as standbys like Sears, Pier 1, Kmart, Walgreens, and Macy’s locations.

But the growth of companies like Scene75 signifies something different, as the very idea of malls as gathering places seems nostalgic in an increasingly online age. Americans aren’t just shopping at home, they’re more likely to stay at home, period. From 2000 to 2017, out-of-home entertainment spending dropped 3 percent, according to U.S. Department of Labor consumer spending data, while spending on audiovisual equipment and services rose 6 percent and spending on cellular phone equipment and services shot up 534 percent.

“Entertainment is a zero-sum game,” says Nick Egelanian, president of retail consultancy SiteWorks. In fact, he says, “the amount Americans spend to go out is actually going down, because they’re staying home more.”

Faced with the challenges of drawing crowds and ringing up sales, malls across the country aren’t just adding new experiences as an added attraction, they’re giving over large swaths of space to entertainment companies and expecting them to become the main draws. This includes expansive family entertainment centers, destination experiences such as the new American Dream Mall in New Jersey (which includes an ice rink and indoor ski slope), and experimental installations by art collectives such as Santa Fe-based Meow Wolf. Meant to be a recreation of Main Street, malls are quickly becoming, in part, theater districts for entertainment.

As Egelanian says, mall owners are moving beyond basic “101-level” entertainment options to attract larger, more complex entertainment venues that can attract repeat customers.

But as the industry turns to entertainment as a way to save the shopping centers that have traditionally served as focal points for many cities and towns, Egelanian believes this concept can’t be a long-term solution for more than a relatively small number of malls.

“The A or B-plus level malls will survive,” White adds. “The rest will turn into Amazon distribution centers or other uses. We’ve always had too many square feet of retail, and now it’s insane.”

White is especially bearish about the future of these kinds of family entertainment venues. It’s simple demographics: the percentage of households with kids continues to decline.

“The adults are the ones who spend the money, and they want to go to venues that suit their taste, so that’s the market to chase,” he says. “The family market is on the decline.”

Can existing mall designs be repurposed?

To understand why mall operators see large-scale entertainment as a potential solution, it’s important to go back to the way malls were originally designed, says Egelanian. In a bid to replicate Main Street America, early mall designers laid out these new shopping centers with large anchor tenants to draw in large numbers of shoppers, and small “streets” of specialty stores in between that would benefit from the foot traffic. This is known as the dumbbell model.

But over the last few decades, as department stores have collapsed, the model has fractured. Egelanian says just the 200 or so highest-tier malls of the roughly 1,000 currently operating will be left when the current wave of contraction and changes in consumer behavior are complete.

“A mall is a body with a circulatory system,” says Egelanian. “If it’s only getting blood in one section, say the torso and not the head or the feet, it’s going to die.”

A former mall space converted into an entertainment center.
Inside Scene75’s location in Columbus, Ohio, formerly a Macy’s at the Tuttle Crossing Mall.
Courtesy Scene75

Mall owners hoping to stem the slide into irrelevance are employing three main strategies, he says. The first is simply opening up the empty space to any entertainment venue that can fill it, such as an amusement park. He sees most of these as being underfunded, under-capitalized, and just not done very well—attempts to reuse space on the cheap that aren’t sustainable, and not the highest and best use of the property.

The second option is when landlords seek out quality, national chains with name recognition, such as Andretti Go Karting (five locations in the U.S.) or Legoland Discovery Centers (13 malls across the U.S.) or the Crayola Experience (five locations). They’re attempting to sustain the mall with upscale entertainment options as a magnet. This strategy has seen mixed results; the new tenants often bring in traffic, but it’s not always shopping traffic.

A number of new companies and concepts use this type of strategy. Esports are being courted as a new way to make malls relevant. (Pharrell Williams is co-investor in a project in Virginia Beach looking to include a 2,000- to 3,000-seat arena for live video game competitions.) Allied Esports signed a partnership with Brookfield and Simon, two of the nation’s largest mall operators, and plans to open up dozens of regional video game arenas across the country in the next five to six years, says CEO Frank Ng. The Void, a VR entertainment concept, just signed a deal with mall operator Unibail-Rodamco-Westfield (URW) to open 25 new locations in malls in the U.S. and Europe by 2022. Chains like Topgolf have, according to White, successfully reinvented the driving range and found ways to bring in non-golfers.

Then there’s the wave of immersive pop-up museums, such as the Museum of Ice Cream, or Candytopia. White says these types of temporary events have proven successful in the short-term, but he doesn’t see them as sustainable anchors in the long-term. Cycling through pop-ups requires set-up costs and extra promotion, and they don’t draw repeat traffic.

“The visitors that flock to these limited-time events are looking for new things all the time,” he says. “Once you post about it, there’s no value to post again, or visit.”

Egelenian’s third example is making entertainment part of the strategic core of the entire mall. His best example is American Dream, the three-million-square-foot New Jersey mall and entertainment center that just opened outside of New York City. The space, when it’s fully up and running later this year, will be split evenly between entertainment options and shopping, at stores ranging from outlet-type shops to high-end brands such as Saks Fifth Avenue and Hermes.

Egelanian considers American Dream an experiment, one fellow operators and developers will be closely watching.

“The big question is, if you have that much entertainment, will it drive much retail sale?” he says. “We won’t know for another six months.”

A hallway with installations and video games inside Meow Wolf’s House of Eternal Returns.
The interior of the House of Eternal Return, the first project by arts collective Meow Wolf, located inside a converted bowling alley in Santa Fe, New Mexico.
Courtesy Meow Wolf
A site map of the Area 15 entertainment center and mall, set to open in Las Vegas later this year.
Meow Wolf will be one of the main draws at Area 15, an “experience shopping mall” opening in las Vegas this year.
Courtesy of Meow Wolf

Malls-as-entertainment arrive as consumers are staying home

Both White and Egelanian believe that the shrinking of the retail footprint across the country means that eventually, only high-end shopping centers serving the affluent will survive in a form we currently identify as a mall. In many ways, they’ll also be entertainment-based, though the entertainment will be upscale food and beverage options.

They also think that the entertainment companies trying to fill the void, both in terms of actual physical real estate and the leisure time of the public, will soon be faced with a situation where too much available real estate leads to too many competitors and not enough customers.

Sandler believes family-oriented entertainment venues can still prosper, and be long-term, consistent anchors.

“We’re proud of our model, and want to attract a community that isn’t just passing through, but one that returns,” he says. “We’re a family business that can have 20, 30, or 40 birthday parties a week.”

A big question, from a property owner perspective, is how many of these venues a metro area can support. Naveen Jaggi, president of retail advisory services for JLL, compares it to the food hall trend.

“Six years ago, we had 30 or 40 food halls across the country,” he says. “We predict that by 2024, there will be roughly 450. There’s certainly a risk at that point of being overbuilt, leading to cannibalization.”

Maybe the future of mall real estate, and the way to get people out of their houses, is something much more radical. Meow Wolf, an arts collective-turned-business in Santa Fe, became famous in 2016 when it transformed an old bowling alley into a massive DIY arts installation filled with neon plants, secret rooms, spider-like statues, and non-linear storytelling called the House of Eternal Return. It gave the grassroots creative collective the backing to form a business that employs more than 400 people, one that will soon take a step forward into a more commercial realm when it joins other tenants at Area 15, a shopping center opening in Las Vegas. Their contribution to the project—which also includes a 32-foot-high volcano made of bamboo—is a yet-to-be unveiled “immersive entertainment complex.”

Meow Wolf has been getting attention from malls and commercial property owners for years, according to collective member and executive creative director Corvas Brinkerhoff. They see expansion into these types of real estate projects as a perfect pathway for tapping into the desires of a new generation of consumers who are thought to value experience over buying and collecting stuff.

Focused on promoting art and culture, Meow Wolf will soon be part of a new wave of immersive businesses that will benefit from this influx of new space, says Brinkerhoff, when it opens in Area 15, as well as forthcoming projects in Denver and Phoenix. Malls may not be retail playgrounds anymore; maybe these new businesses can help redefine malls and their role as common social spaces.

“You see this consumer behavior moving online, as well as all this retail real estate becoming available,” he says. “What are we going to do with this space, when we don’t need to sell things in person? We think there’s still value in this space, and Meow Wolf is kind of a perfect fit.”

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