Malls seek to evolve as the pandemic hastens a retail overhaul

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In southwest San Francisco near San Francisco State University and championship golf courses, Brookfield Properties is redeveloping its Stonestown Galleria in perhaps the most disruptive retail environment in modern times.

Macy’s vacated the mall in 2018, and Nordstrom followed about 18 months later. Consequently, Brookfield, a global real estate developer and manager, is spending $149 million to reconfigure the 804,000-square-foot property, adding a Whole Foods, a health care provider and a Sports Basement sporting goods store, while expanding an existing Target and relocating a stand-alone Regal Cinemas to inside the mall.

Plans to build apartments are also in the works at the property, which after reopening in June was ordered to close again as coronavirus cases surged in California.

More than just a routine overhaul, the improvements represent an effort to stay relevant as growth in online shopping combined with shifts in retailing practices and consumer tastes have for years dismantled the traditional shopping mall model.

“If the old mall design was one of two to four department stores with connecting retail space, in my mind what we’re doing at Stonestown Galleria is closest to the modern footprint going forward,” said Adam Tritt, executive vice president of development for Brookfield. “We don’t necessarily see the pandemic or shifting role of department stores as new. Retail is always changing.”

Indeed, Brookfield, Simon Property Group, Unibail-Rodamco-Westfield and other mall operators have spent billions positioning themselves for a future with few or no department stores after the struggles of traditional anchors like Sears and Macy’s. Under pressure caused by pandemic-induced lockdowns, J.C. Penney and Neiman Marcus are the latest distressed mall anchors to declare bankruptcy and close stores. Malls were also hit by the loss of other retailers that have fallen during the pandemic, like Brooks Brothers and Ascena Retail Group, owner of Ann Taylor and Lane Bryant.

Developers have replaced the vacant big boxes with a mix of retail, dining, entertainment, fitness, coworking and health care options. They have also added apartments, hotels and offices to the properties — often to make better use of vacant parking lots and create built-in traffic generators — and they are beginning to create distribution and self-storage hubs at malls as more people purchase their goods online.


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