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San Diego Malls Ride A Changing Retail Wave

Manikins are temporarily stored on the third floor of MIssion Valley Macy's as the store gets ready to close, March 9. 2017
Tom Fudge
Manikins are temporarily stored on the third floor of MIssion Valley Macy's as the store gets ready to close, March 9. 2017

San Diego Malls Ride A Changing Retail Wave
San Diego Malls Ride A Changing Retail Wave ' GUEST:Carrie Bobb, vice president, CBRE

Consumer spending has been rocked by online retail which is making big changes to the Great American destination the shopping mall. San Diego has been hit by the closure of big box and anchor stores and the realization that brick-and-mortar merchants have to find a way to change. Editor Tom fudge took a trip to the mall and he has this report. It was a rainy day in San Diego and Macy's in mission Valley had just begun the closeout sale. Inside the store there were signs all over saying everything must go. And architectural icon and a key part of San Diego's first suburban shopping mall it was one of 65 Macy's being closed down around the country. I am kind of sad to see it go. It has been a landmark that I've seen for a long time but I do think that the sales need to be better.'s The sales have not been good. Study by elite wealth management said there was a 48 % decline in visits to US dollars between 2010 and 2013. A marketing professor from San Diego state says physical retail is very disturbed. There are some good things and some bad things happening in retail. One of the top things right now is there is too much space so there's a lot of retailers that are struggling mostly department stores. Along with Macy's closures JCPenney will be closing up 140 stores this year also in mission Valley Mall sport chalet closed last year. And the same is true of REI at town center. That great disruptor that was alluded to we will just call it Amazon. Amazon prime. Three? I have pretty much whatever I am looking for and it arrives at my doorstep sometimes the same day or within two days. Land-use consultant Marcella Escobar says time is money for busy adults and that means trips to the mall are expensive for teenagers not only can you shop online social media provides plenty of ways to connect with others online. So you don't have to go to the mall to meet your friends so as a teenager you can stay at home in your bed or on a couch and FaceTime your friends and you no longer have that need to go someplace to see them. Seven they do go out and beat each other they want something different. They want something done and experiential. Working people go to get those experiences? There's another mall in Delmar that is not very big, hemmed in by the local topography and it's run by a guy who talks very enthusiastically about the paradigm shift in retail. It has changed. The whole dynamic of shopping centers is more geared toward customer experience that is customer service. Jeffrey is the managing order -- owner of Flower Hill Promenade. We bring customers here because they want to be your as opposed to because they have to be here. It's important that hardship equals marketshare. It is a compact mall with just 13 acres. Is ornately landscaped and has spaces where people want to linger. It is anchored by whole foods market and has a family orientation. He said they have some new plans to make your visit even more desirable. If you're sitting with me and having coffee what we will try to do to you while you are doing that is have your car washed and filled up with gas to give you more time to spend Flower Hill in a relaxed fashion. The most ambitious plan to re-create a mall is taking place at West Hills UTC in University City. Construction is now underway. It's an expansion that they say will include a host of new restaurants and a total of 90 the retail tenants. Back at the mission Valley Macy's the closeout sale has been going on for two months. Display cases are virtually empty. Everything is 70% off on the third floor a collection of nude mannequins in temporary storage the content in the with adjuster and glad. Marketing professor said economic turmoil will be a long-term issue for the American shopping mall. It used to be the mall was the place to go regardless because it was new and different and it offered so much variety and exciting things and people became a little bit accustomed to this now it just needs to go to another level and become that much more exciting and that much more interesting for people that want to go. Tom fudge KPBS news. Joining me is Kerry Bob vice president of commercial real estate firm CBR E. Welcome to the program. Thank you. In times teacher we heard that visits to stores that 48% between 2010 and 2013. It is amazing retail stores have survived at all considering that kind of decline. I am wondering how have retailers been trying to get customers back in the stores. That number seems really high to me when I heard it and I was wondering if it was particularly the department stores because you are certainly seeing the stress on the department store big boxes. But retailers are pretty much cautiously optimistic about the future. It is not as heavy as I think maybe the perception is. Everyone seems to be still increasing in sales. As far as the e-commerce and online sales we are really seeing friends use both the online sales in the brick-and-mortar stores really working together. It is hard to have one without the other and if one is week it impacts the other so they go hand-in-hand. He say retail stores are not doing that badly but Macy's and pennies are closing dozens and dozens of stores. Does this mean the companies are in trouble or are they reinventing themselves. Those are certainly examples of department stores. That landscape has completely changed. So that aspect you are absolutely right. Is I think it is a little bit of both they are reinventing themselves and getting smaller. Online sales have certainly impacted the footprint of not just those retailers but retail in general. Stores are getting smaller but in many cases those department stores on their own real estate you are seeing those retailers play landlord and it is more profitable for them to lease out there space and they can part of it up and divide it and create storefronts for smaller tenants and they make more money doing that than their actual retail business We heard that consumers often go to look at items in physical stores and then go home and make the purchase of the item online. Have retailers ceased on that bind strategy to make to shirk and simmers by from the company online. It is a big topic today to be cutting-edge and capture the consumer when they are inside the store but it is working both ways. A lot of times people are buying online and going back to the brick-and-mortar stores to return it so you are seeing both sides of the spectrum. Retailers are trying to come up with new technology and innovative ways to capture the consumer while they are in the store and if they come back with a return how to turn it around to an additional purchase. We heard that one of the ways shopping centers are trying to compete is to create a desirable destination for customers in what ways does that differ from what we know as standard shopping mall. Then there is a really smart and they are trying to create ways to keep the consumer at the property longer to spend more money. They are doing that in ways that they are creating different types of tenant mix so everyone is talking about how the mall is not the hottest retail today so only if it's in every market. If you are in you can see the same retailers next door to each other and every market. Memories are really trying to create authentic new experiences that are really interesting as well is entertaining to keep people there longer. It's a little counterintuitive today in our culture where you want everything really convenient and really fast and curbside pickup and things that make it easy for you to run in and out so there's little bit of pull and push going on where you want to be making it convenient and have people make multiple trips to the same project more frequently while at the same time slowing down and allowing them to take time to check out each store and enjoy being there. How do you see mall space being used in the future considering that these gigantic malls that we have probably we won't have the need for that many retail stores in one place. I think that a great question I think people are looking at the malls completely differently exactly what you just start over if you could add office and residential and a mix used projects are really big right now. I also think the retail sector 1 million square foot mall is not in demand as much was 15 years ago. Everyone likes these unique experiences and then as far as the malls that are being repurposed that might not go mixed used your seen heavy emphasis on entertainment whether it is movie theaters or bowling alley by restaurant concept things like that. The consumers want to be entertained when they are out. We have so much pulling and vying for our attention that you want that experience when you are shopping. I have been speaking with Kerry Bob vice president of the commercial real estate firm CBR E. Thank you.

San Diego Malls Ride A Changing Retail Wave
Competition from online buying is forcing some stores to close while others struggle to think outside the big box.

It was a rainy day in San Diego and Macy’s in Mission Valley had just begun their closeout sale. Inside the store there were signs all over saying “Everything Must Go.” An architectural icon and a long-time denizen of San Diego's first suburban shopping mall, it was now one of 65 Macy's stores being closed down around the country.

“I’m kind of sad to see it go because it has been a landmark that I’ve seen for a long time,” said Macy’s shopper Heather Zook, “but I do think the sales need to be better.”

Sales have not been good. Consumer spending has been rocked by online retail, which is forcing big changes to that great American destination, the shopping mall. One study by Elite Wealth Management said there was a 48 percent decline in visits to U.S. stores between 2010 and 2013.

Miro Copic is a marketing professor at San Diego State University. He seems to make an understatement when he says physical retail is very “disturbed.”

“There are some good things that are happening in retail and some very challenging things. One of the tough things right now is there’s too much space. So there are a lot of retailers that are struggling…mostly department stores,” he said.

Along with the Macy’s closures, JCPenney will be closing nearly 140 stores this year. Kmart and Sears have made similar announcements. Sport Chalet closed its store in the Mission Valley mall last year. At Otay Ranch Town Center, in Chula Vista, the same was true of REI and Anthropologie.

That great disrupter mentioned by Copic? Amazon.

“Amazon Prime: Three clicks and I can have pretty much anything I’m looking for. And it arrives at my doorstep, sometimes the same day or within two days,” said Marcela Escobar-Eck, principal at the Atlantis Group, land-use consultants.

San Diego Malls Ride A Changing Retail Wave

She said time is a valuable commodity for adults and that makes a trip unattractive. And teenagers can shop online and still find plenty of ways to connect with their friends through social media.

“You don’t necessarily have to go to the mall to meet your friends. So as a teenager you can stay at home, on your bed or on your couch and Facetime your friends, and you no longer have that need to go out to see them,” Escobar-Eck said. “So when they do go out, they want something different, they want something fun, they want something experiential.”

Heart share equals market share

That focus on creating the right “experience” at the mall is what some people call the paradigm shift in retailing. One guy in San Diego who really loves to talk about that new paradigm is Jeffrey Essakow, president of Protea Properties. He’s the managing owner of Del Mar’s Flower Hill Promenade.

“That shift has changed the whole dynamic of shopping centers. It’s more geared toward customer experience than it is customer service,” he said. “So that brings customers here because they want to be here, not because they have to be here. That’s important to us. Heart share equals market share!”

There’s something about Essakow that makes him look like he's among of the industry vanguard. He wears a casual black shirt with a beaded necklace and bracelet. He speaks with a South African accent and refers to a marketing book, lying open on the table, that he calls his "bible."

Managing owner of Flower Hill Promenade Jeffrey Essakow (right) speaks to KPBS's Tom Fudge at the mall, March 9, 2017.
Matthew Bowler
Managing owner of Flower Hill Promenade Jeffrey Essakow (right) speaks to KPBS's Tom Fudge at the mall, March 9, 2017.

Flower Hill is a compact mall (just 13 acres) that is precisely landscaped and has a clear emphasis on creating spaces where people want to linger. It’s anchored by a Whole Foods Market and it has a family orientation. There’s an adult yoga studio called CorePower and another yoga studio for kids. Just drop off the little ones there, and you can carry your yoga mat upstairs to work out in peace.

Essakow said they have more plans to make your visit to Flower Hill even more desirable.

“So if you’re sitting here having coffee, what we’ll try to do while you’re doing that is have your car washed, have your car filled up with gas… do those things so you can sit here and do some of the things that would take up your time, so to give you more time to spend at Flower Hill in a relaxed fashion.”

Expansion of UTC

Look at other malls in San Diego and you see the effort to make them a different kind of place. There’s the public library at Otay Ranch Town Center. The Westfield UTC mall in University City is one of the places with a Tesla car dealership, which sends people home with stories of putting their 10-year-old behind the wheel.

In fact, UTC has the most ambitious plan of all. It’s an expansion that they say will host new restaurants and a total of 90 new retail tenants.

Also coming to UTC, a transit center built around a new trolley stop, and 300 apartments.

“The fact that UTC is adding residential I think is also critical,” Escobar-Eck said. “Because it’s the difference of ‘Am I going to get into my car, and drive to a mall where I know I’m going to have to find parking and I’m going to wrangle crowds,’ versus ‘I live here, I can shop here, I can take care of most of my needs here.’”

Back at the Mission Valley Macy’s, time has passed and the closing sale has been going on for two months. The display cases are virtually empty and everything’s 70 percent off. Up on the third floor a bunch of nude manikins, in temporary storage, gesture and glance in ways that look haunted.

Display cases are mostly empty as shoppers look for bargains at Macy's closeout sale, March 9, 2017.
Tom Fudge
Display cases are mostly empty as shoppers look for bargains at Macy's closeout sale, March 9, 2017.

Marketing professor Miro Copic said economic turmoil will be a long-term issue for the American shopping mall.

“It used to be the mall was the place to go, regardless, because it was new, it was different and it offered so much of a variety and exciting things.” Copic said. “And now it just needs to go to another level, and become that much more exciting and that much more interesting for people to want to go.”