Butler County shopping centers face competition, changing times

Butler County options include Liberty Center and reinvented Towne Mall.

Retail shopping centers – coming out of the depths of the great recession – are looking to reinvent themselves and adapt when possible in an industry that faces challenges from over-saturation and e-commerce.

In Butler County, that means everything from the nearly 40-year-old Towne Mall Galleria in Middletown working to fill vacant space with a mix of diverse tenants, including entertainment, to the year-old Liberty Center in Liberty Twp. building its tenant mix and adding family-friendly events and experiences to grow its customer base.

On average nationwide, shopping centers are 93.4 percent occupied and many areas are seeing redevelopment instead of new development, according to Stephanie Cegielski, International Council of Shopping Centers, a trade organization of the global retail industry.

With the days of a cookie-cutter mall long gone, existing properties are looking to their community and catering to the consumers within it to adjust their tenant mix accordingly.

That includes fitness clubs, grocery stores, restaurants, climbing walls, miniature golf, movie theaters — anything that turns the typical shopping trip anything but that.

“They’re definitely more experiential,” she said. “They’re really trying to change themselves.”

Centers that lose a large anchor store often turn that space into a multi-use, multi-purpose area, sometime adding another floor, office space, a fitness club or anything else that fits the space, both literally and demographically.

That's been the case for Towne Mall Galleria in Middletown, purchased in 2012 by George Ragheb's California investment group. While many of the smaller spaces at the 465,000 square foot mall remain vacant, Ragheb has worked to fill massive, once-empty parts of the mall by securing leases from off-price retailer Burlington Coat Factory (March 2015, nearly 11-year lease), discount retailer Gabe's (October 2015, 11-year lease) and fitness center Planet Fitness (January, 20-year lease).

“The name of the game is diversification and listening to the consumer,” said Ragheb, vice president of Towne Mall Galleria LLC. “You’ve got to pay attention to what the consumer needs in this location. You’ve got to be very, very careful in analyzing the demographics and the retailer mix in the neighborhood.

“Consumers are not very forgiving, and a mistake can be very costly.”

Shopping center owners also must not dilute a retail mix by bringing in strong competitors, Ragheb said. Existing stores at Towne Mall Galleria, including new ones, are doing well because they are not battling over the same consumer, he said.

Towne Mall Galleria is looking to bring in a sporting goods store, a shoe store and "several other things" in 2017. He's also open to selling off more outlying areas of the mall's property, as was the case with the land purchased by an outside developer to build and open Buffalo Wild Wings and Aspen Dental Group.

He's looking to find several tenants to replace Elder-Beerman, an original mall tenant set to move out after its lease expires at the end of January.

“It doesn’t make sense to for us to sit and wait for a big tenant … versus if we can do better by looking for multiple tenants to take the space, I think we will do significantly better,” Ragheb said.

Future growth will be geared toward diversifying the tenant mix, he said.

“Today, people are looking for a nice shopping experience, for entertainment … they’re not looking for 17 different clothing stores,” Ragheb said. “Their needs are different. Consumer habits evolve over the years, and if you’re a company that can evolve with consumer needs, you’re going to continue to be successful. If you don’t, you’re going to die.”

While the owners of Towne Mall Galleria work to prevent that from happening, nearly 300 malls nationwide haven’t been as fortunate in the past five years.

After seeing growth from 2002 to 2011, the number of enclosed malls nationwide dropped 18.5 percent the last five years

, according to nationwide statistics from CoStar Realty Information and ICSC.

Those malls face more competition. The amount of lifestyle — or power — centers grew from 381 to 466, a 22.3 percent increase in the last five years. That came after seeing gains of 31.8 percent between 2006 and 2011 and 41 percent from 2002 to 2006.

And outlet malls grew from 329 to 365 from 2011 to 2016, a 10.9 percent increase.

An overabundance of retail options, especially ones that duplicate one another, means trouble for middle level malls and their stores, according to Howard Davidowitz, chairman for Davidowitz & Associates Inc., a national retail consultant and investment banking firm headquartered in New York City.

“Lots of them are going to close,” said Davidowitz, citing recent news of Sears, Macy’s and JC Penney closing hundreds of stores on an annual basis and expanding through discount divisions and online sales instead.

The mall concept is on the decline, he said, because a combination of factors, including too many malls, too many stores, “an explosion in online spending” and a crushed middle class seeking to be “trading down” when it comes to shopping because it has less money.

Ragheb said Davidowitz is correct in a theoretical approach to the situation.

“Can you bring Dillard’s back? Can you tell you tell Elder-Beerman to stay?” he said. “No, so it will never be what it used to be, but it can be what fits today’s economy and today’s demographics and today’s shoppers’ requirements.”

Online shopping and other trends have made the industry more competitive, with many malls and stores capitalizing upon digital technology. That includes offering online ordering and in-person pickup, to shopping center landlords partnering with tenants to use geolocators that push “today only” deals via apps, Cegielski said.

While high-end malls are seeing record productivity and pricing that reflects that, middle level to lower level malls continue to struggle. They are dealing with a steady “burn down” in rents and, in some cases, the eventual closing of entire shopping centers, according to Suzanne Mulvee, director of research and real estate strategist at CoStar Portfolio Strategy, a division of CoStar Realty Group.

Retailers that choose to shut down various locations, such as Elder-Beerman choosing to not renew its lease expiring in January at Towne Mall Galleria, aren’t giving up on certain location as much as they are choosing to focus on locations that are going to be winners, Mulvee said.

First and foremost, owners or landlords of retail malls and the stores within are concerned with driving customer traffic, she said, working together to do the job that anchor stores once did on their own. Various traffic-driving options including adding restaurants, entertainment options and programming like yoga, farmer’s markets, cruise-ins, and holiday events — strategies already employed by Bridgewater Falls and Liberty Center.

Although the future may hold “major announcements” about retail giants closing up shop in more locations, Mulvee said it’s likely the location itself is struggling more than the retailer itself overall.

Property/Tenants/Retail & Restaurant Space (square feet)

Bridgewater Falls/71/635,000

Cincinnati Premium Outlets/105 400,000

Liberty Center/102/1,000,000+

Towne Mall Galleria/12/445,687

Voice Of America Centre/59/413,243

About the Author