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TMCNet:  Once-thriving dead malls throughout metro Detroit now struggle to survive [Detroit Free Press :: ]

[June 18, 2014]

Once-thriving dead malls throughout metro Detroit now struggle to survive [Detroit Free Press :: ]

(Detroit Free Press (MI) Via Acquire Media NewsEdge) June 18--It was Michigan's first enclosed shopping mall, a 1960s marvel of air-conditioning, shiny surfaces and suburban convenience.

Today, the shuttered Summit Place Mall in Waterford Township (originally called Pontiac Mall) is an archetype of a dead mall, complete with grimy scars from removed store signs and a vast weed-choked parking lot.

The mall's 1.4 million square feet of abandoned space could also be a boogeyman for some aging malls in suburban Detroit that are struggling with storefront vacancies, younger competition, demographic changes and disruptions to their business model from Internet shopping.


It's an open question whether the economy, still slowly improving, can reinvigorate shopping centers that long ago ceded their regional dominance to fancier malls further out in the suburbs.

A handful of metro Detroit's dying malls were demolished in the past decade and redeveloped into open-air big box retail centers, such as the former Livonia Mall, the Universal Mall in Warren and Wonderland Mall in Livonia.

But retail experts question whether it makes sense to similarly redevelop Summit Place, as there is already plenty of unused strip mall space nearby and the market may not absorb more.

As well, the growth of online retailing could reduce traffic for brick-and-mortar stores. And as the baby boom generation retires, that large demographic will naturally cut back on shopping.

With few near-term prospects for redevelopment, local officials have turned their attention to catching metal thieves who try to sneak inside the closed mall -- a problem more commonly associated with vacant buildings in Detroit than in Oakland County.

"The biggest thing is keeping the scrappers out of there ... there's a lot of copper, a lot of brass," said WaterfordTownship Supervisor Gary Wall. "Scrap metal is worth the same out here as it is in the cities." Development experts say Summit Place was hurt by factors that largely predated the popularity of online shopping and, in similar ways, affected other once-thriving shopping epicenters from Southfield's Northland Center mall (still open) to the old Hudson's flagship store in downtown Detroit (closed in 1983): -- New competition.

-- Changing local demographics.

Since Summit Place's opening in 1962, strip centers have spread along Telegraph, saturating the area with retail. And many full-scale malls and shopping centers popped up through the decades across metro Detroit that Summit Place wasn't designed to compete with.

The arrival in 1998 of Great Lakes Crossing Outlets, an enclosed mall about 5 miles away in Auburn Hills, is widely thought to have lured away many former Summit Place shoppers.

"If Great Lakes Crossing was never built, Summit Place would probably still be open," said William Taubman, chief operating officer of Bloomfield Hills-based Taubman Centers, which developed Great Lakes Crossing.

-- Photo gallery: Dead & dying metro Detroit malls -- Mobile users tap here The demographics of the Pontiac area also changed through the years. Nearby residents now wouldn't necessarily frequent the sort of higher-end retailers that could have helped Summit Place compete with newer malls.

"They're marginal malls because they're in marginal areas, in many cases," said Kenneth Dalto, a Bingham Farms-based retail analyst, speaking in general about struggling mid-tier malls.

"The cycle is basically the owner stops investing, the people stop spending and stores go out of business," Dalto said. "That creates more vacancy, which makes it harder for (new) stores to go in an unoccupied mall." Summit Place underwent at least three renovations in its lifetime and had about 150 stores by the late 1980s and early 1990s, including a Hudson's, Montgomery Ward, JC Penney, Kohl's and Sears.

But according to Wall, the township supervisor, well over a quarter of the storefronts in the mall's final expansion wing were never filled.

As tenants dwindled, the mall's interior closed for good in September 2009 and anchor stores JC Penney and Macy's shut their doors the following year. Well-publicized plans to build a nearby developmental league baseball stadium also fell through.

"It's sad to see it empty like this," said Barbara Adams of Clarkston, who used to shop at Summit Place and this month visited Sears, the last remaining store attached to the mall.

A representative for the mall's owner, Los Angeles-based SR Capital, did not return messages last week.

The 2007-09 recession delivered a gut punch to many malls nationwide.

Before the downturn, there were 25 ailing malls in the U.S. in 2006 with a 40% or higher vacancy rate. That number rose to about 75 in mid-2012 and has remained steady, said Ryan McCullough, a real estate economist with CoStar Group, a real estate information firm that gathered the data.

Overall, there were more than 1,500 shopping malls in the country last year, according to the International Council of Shopping Centers.

Some malls have filled their gaps by closing wings or bringing in unconventional tenants, such as medical offices, schools and churches.

Most malls in metro Detroit do not disclose occupancy rates, including the visibly struggling Northland Center in Southfield and Eastland Center in Harper Woods, both owned by New York-based Ashkenazy Acquisition Corp.

Occupancy was edging below 85% at the 50-year-old Macomb Mall in Roseville, which is now undergoing extensive renovations under a new owner, West Bloomfield-based Lormax Stern Development, which essentially saved the mall from deteriorating to a point of no return.

One of the first suburban shopping centers in the country, Northland Center continues to hang on despite an abundance of darkened storefronts and lowered metal gates.

"A lot of stores have moved out, but it's still a good mall," said Angela Bey of Farmington Hills, who was speed-walking through Northland this month on a lunch break.

Northland will soon be home to Triumph Church, which in December bought its long-vacant JC Penney and is looking to transform the department store anchor into an event and worship space.

Experts say that Internet shopping is having a noticeable impact on middle-tier malls whose common anchor stores, such as JC Penney and Sears, have been closing locations and cutting shelf space.

So-called Class A mall properties, whose tenants do over $400 in annual sales per square foot, have proved more resilient to the online competition. Local examples include Somerset Collection in Troy, which years ago overtook Northland as thedominant fashion mall, and The Mall at Partridge Creek in Clinton Township, a newer open-air development.

Class "A properties that are well-located and on a good road in a community where people are shopping, they're going to be just fine," said Thomas Guastello, owner of Center Management in Birmingham, a commercial developer.

"But the major anchors are not as committed to being in B- or C malls," he said. "They're getting out of there because it costs them too much money. Their sales don't justify it." Although growing fast each year, Internet shopping is not entirely replacing in-store shopping. E-commerce represented just over 6% of total U.S. retail sales last year, according to U.S. Census Bureau data.

Taubman, whose company has four shopping centers in Michigan, said he believes the in-store experience can resonate with shoppers and communicate a merchant's brand in ways that aren't possible online.

But technology isn't the only concern among fans of real-life shopping. The large baby boom generation is getting older, and market studies show that people do less shopping in retirement than during peak earning years.

"The pie is getting smaller, and the size of the pie the malls can command is smaller yet," said McCullough, the CoStar economist. "The mall model is certainly not dead. But that doesn't mean there aren't some that are problematic and probably never going to revive." As for the future of Summit Place, Oakland County officials fielded interest in the mall property last month from a few national developers during a retail convention in Las Vegas, said Matthew Gibb, a deputy county executive. But no deals yet to report.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.

___ (c)2014 the Detroit Free Press Visit the Detroit Free Press at www.freep.com Distributed by MCT Information Services

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