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Struggling malls lure shoppers with upscale dining, entertainment options

LOS ANGELES—Shoppers braving the mall this holiday season may notice more that’s new than the day’s discounts.

Many mall owners are spending billions to add more upscale restaurants and bars, premium movie theatres with dine-in options, bowling alleys and similar amenities. Some have turned swaths of space that previously housed department stores over to health clubs and grocery stores. Others are undergoing no less than a ground-up transformation to make room for office space, hotels and apartments.

The trend has been gaining traction as the companies that operate malls look for ways to keep people coming in at a time when Macy’s, Sears and other big department store chains have shuttered hundreds of stores and consumers increasingly opt to shop at Amazon.com and other e-commerce sites.

“The mix of uses at our malls is changing,” said Stephen Lebovitz, CEO of mall owner CBL Properties. “It’s becoming less apparel and more dining, more entertainment, more service, more fitness, wellness — the types of categories that are more popular.”

CBL, which owns and manages 119 properties, including malls, outlets and open-air retail centres, has been adding more nonretail tenants after a wave of recent retailer bankruptcies, including at Gymboree, Payless ShoeSource and The Limited.

At its CoolSprings Galleria mall in a suburb of Nashville, CBL has put in a bowling alley and an indoor trampoline park, among other attractions. Lebovitz said the company is also trying to add dine-in movie theatres with reclining seats. “It’s a nicer, more experience-focused type of use.”

Carving out space for movie theatres, videogame arcades and food courts isn’t a new strategy. What’s noteworthy is the degree to which mall owners are now counting on tenants that sell experiences, rather than physical goods. The share of space occupied by nonretail tenants at regional shopping malls reached nearly 13 per cent last year, according to commercial real estate tracker CoStar. It was 10.5 per cent in 2012.


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