Mathrani: 'Malls Will Evolve'

NEW YORK CITY-Notwithstanding reports of tepid holiday sales growth, regional malls actually did quite well for themselves this past Christmas, in the view of Sandeep Mathrani, who oversees more than 100 such centers nationwide. His take, presented in a one-on-one interview this past Friday, was borne out earlier this week by the fourth-quarter report from the International Council of Shopping Centers and the National Council of Real Estate Investment Fiduciaries, which noted a 7.7% year-over-year gain in NOI for the industry.

In part, that success—fewer shoppers, but higher spends per shopper—was due to integration of online and brick-and-mortar channels, said Mathrani, CEO of General Growth Properties, which late Monday afternoon reported that its Q4 funds from operations increased 17% Y-O-Y. He noted that consumers are doing more research online before venturing out to stores, among the reasons that today's successful retailers—and their landlords—are active in both channels.

“The malls will evolve,” Mathrani said this past Friday during a Q&A conducted by Edmund Mander, editor-in-chief of ICSC's Shopping Centers Today magazine for ICSC's SCTLive series. “They'll get smarter, more smart-phone friendly. But effectively, we're just the medium.”

As an illustration of how malls have already begun moving toward the future, Mathrani cited the alliances forged this past December by GGP and three other national mall operators with same-day delivery company Deliv. GGP has begun rolling out the program, which offers shoppers the choice of at-home delivery or pick-up at concierge areas between 6 a.m. and midnight, at four of its centers in California and the Chicago metro area.

Mathrani predicted that the concierge area eventually would replace the customer service counter at malls. In contrast to the more limited functionality of customer-service desks, concierge areas can actually serve as traffic builders for the mall's tenants, he said.

Retailers and mall operators alike are evolving toward increasing tech savviness, and not only from the standpoint of offering online shopping. Mathrani pointed to Nordstrom, Macy's and the Gap as being “in the forefront” when it comes to social media and apps. “The digital wallet is the future,” he said, predicting that as long as consumers are comfortable with its level of security, the concept will have widespread acceptance within three to five years.

As for his own company, Mathrani noted that GGP spends a great deal of time incubating small retail operations, which can then grow to become larger ones. Online is the best channel for such incubation, he said, with mom-and-pop stores getting their start there, becoming successful on the Web and then, in order to achieve scale, looking to brick-and-mortar locations.

Technological advances weren't all that Mathrani discussed in answering the question posed in the title of the SCTLive segment: “How is the mall changing?” He noted that international companies have become an increasingly important segment of the domestic retail mix, and have been generally accepted to the point that many American shoppers are unaware, for example, that H&M is based in Sweden.

For foreign retailers hoping to bring their concepts to the US, it's all about staying power as well as understanding American consumers, Mathrani said. In the case of H&M, the chain didn't do well in its first few years as a US retailer, but hung in there. As of this past Nov. 30, it operated more than 300 stores across the country.

“Today, there are more success stories than failure stories among international retailers,” said Mathrani. “In the past, that was not the case.”

And while some older retail concepts have faltered recently—notably, Sears and JCPenney, both of which have a strong presence at GGP malls—Mathrani said he wasn't counting them out. Should either Penney or Sears close a number of locations, however, GGP would face no impediments to redeveloping the space. “Good things happen to good assets,” said Mathrani, noting that GGP replaced a former Sears with Nordstrom at one property, and divided the space among smaller retailers at another.

Although conventional wisdom 15 years ago held that department stores were on their way out, in 2014 the format itself is healthy, Mathrani said. He noted that in 2011, GGP had about 175 vacancies in department-store-sized spaces; today there are only two. As for the long-term viability of the shopping mall, Mathrani said that a decade from now, “I can tell you that bricks and mortar will be alive and kicking.”