Yet another shopping mall project looks to have fallen victim to “the Amazon effect”, serving as evidence that brick and mortar retail, in the conventional sense, is doomed.
The latest victim is the New Horizon Mall in Calgary. The construction of the “multicultural mega-mall” is nearly complete, but tepid interest forced its developer to push back its planned grand opening to next year. The mall was initially set to open in October of this year. Only 9 of the 517 spaces in the mall have opened for business since May, when owners were first allowed to take possession according to a new report by Global News.
“It’s surreal. It’s not normal – we’re in the Matrix,” one shopper told Global News.
The developer, Eli Swirsky, president of The Torgan Group of Toronto, told Global News:
“I love the mall. I think the mall will be fine,” he said in an interview. “I wish it was faster, of course, but every time I go there I’m awed by its size and potential and I think we’ll get there.
Swirsky told Global News that he expects 20 stores will be open by the end of September, but he still wouldn’t commit to a final grand opening date. Instead, he said that it will likely happen when 80 to 100 stores have opened. That is seen to push back the grand opening well into spring of next year.
The optimistic outlook stands in the face of eerie reality of the project, which shows “For Lease” signs and empty glass spaces traditionally reserves for stores.
Those who have already taken up shop in the mall, including Rami Tawil of Silk Road Importers, think that pushing the grand opening off until there are more tenants is a good idea: “I think now it’s better if we push it a couple of months because we need more stores here to open. We need the people coming to see more stores.”
The mall style is based on a similar mall that the developer opened in the Toronto area – about 20 years ago. The mall is different from traditional malls in the sense that it doesn’t exclusively lease to tenants. Rather, investors can purchase retail space and then have the option of leasing it to others or operating it themselves. The developer also holds large chunks of space in hopes of enticing anchor tenants. None of these have been announced yet.
The few tenants of the mall are at varying stages of readiness. Some are still trying to figure out what type of product or service may be best to offer at the location. Others are trying to re-sell or lease their spaces, according to the mall’s general manager, Jason Babiuk.
The mall was a $200 million project that broke ground in June 2016. Some believe that the difficulty in filling the mall has to do with its condominium-like ownership model, which could attract the wrong type of investors to such a project.
Retail analyst Maureen Atkinson, a senior partner at J.C. Williams Group stated: “The challenge with the condo model is that the people who run the stores are typically not the people who own them. So they would have sold these to investors … who see it as an investment and they may have trouble finding somebody who wants to run a business.”
Earlier this week we learned that mall rents in the United States were plunging as vacancies were shooting toward record highs. According to a WSJ report, the average rent for malls in the third-quarter fell 0.3% to $43.25 a square foot. This is down from $43.36 in the second quarter and is the first time this number has fallen sequentially since 2011, according to research firm Reis.
At the same time, vacancy rates are on the ascent, rising to 9.1% in the third quarter from 8.6% in the second quarter.
Our take? Instead of trying to re-invent an industry that is already on its deathbed by opening a “multi-cultural” mall, maybe Canada should have, at very least, taken a page out of the United States’ once successful mall playbook: bankrupt retail brands and greasy Asian food court samples.
via RSS https://ift.tt/2IF1lYT Tyler Durden