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COVID-19 has likely quickened the end of malls as we knew them

From JC Penney to Neiman Marcus, every department store is struggling. Now every mall is, too.

TAMPA — International Plaza grew into a shopping and dining destination even as suburban malls withered in competition with Amazon.

The mall reveled in luxury, attracting designer brands, like Gucci and Louis Vuitton selling $4,000 handbags.

Its upscale anchors, Nordstrom and Neiman Marcus, stood strong as Sears and JC Penney gutted their stores at other local malls. Patrons lined up for $15 cocktails at the plaza’s outdoor restaurant corridor, Bay Street. Last year, the mall announced plans to add a movie theater and restaurant with bowling and bocce ball.

Now, that theater is on hold. The company behind it has filed for bankruptcy — as have a handful of the mall’s tenants.

Even top-shelf shopping centers are struggling as retailers experience record sales drops amid the coronavirus shutdown. International Plaza is facing the possibility of its anchor stores going dark forever.

“With the pandemic, all the malls are in the same boat — the ones that were struggling and the ones that were thriving,” said Chris Bowen, a developer with RD Management, which owns retail property locally and nationwide.

Shoppers were walking International Plaza last week, but there was no trouble social distancing. Just over half of its stores have reopened so far, according to the mall’s owner.

With the sudden loss of customer traffic, department stores in particular are reeling.

Nordstrom is set to close 16 of its stores, two in Florida. The one at International Plaza just reopened on Thursday.

Neiman Marcus is filing for Chapter 11 bankruptcy and its Tampa location is still closed.

Dillard’s reopened more than two weeks ago and the mall itself opened back up May 5. Stores are required to keep capacities at no more than 50 percent.

Shoppers Andrea Cousino, 13, of Sarasota, left, and Grace Fontana, 13, of Sarasota, leave Westfield Countryside Mall on Friday, May 22, 2020, after shopping at Tilly's and Forever 21 in Clearwater. Two thirds of the mall's 136 stores are open with more expected to open next week, said Brian Brink, the mall's manager. [DOUGLAS R. CLIFFORD | Times]

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Malls were already trying to adapt to consumers’ changing tastes before the virus.

They began to focus on experiences that can’t be replicated with online shopping. That’s why International Plaza asked the city to approve construction plans for the bocce ball restaurant, Pinstripes, and movie theater.

International Plaza already has grown an outdoor mix of eateries and shops that include the area’s only Urban Outfitters and designer brands that treat their shoppers like royalty. The mall has curated a selection of stores not offered anywhere else in the area.

“In the future, we believe International Plaza and Bay Street will become even more important to the community,” said Maria Mainville, a spokeswoman for Taubman, International Plaza’s owner. “When a greater sense of normalcy is restored, people will likely have an even stronger desire to connect with others, feel a renewed sense of community and have some fun that includes shopping, dining and being entertained.”

Related: The Future of Univeristy Mall is that it won't be a mall anymore

WestShore Plaza, a mall less than 2 miles from International Plaza, has purchased land near its property. It plans to use that, and a former Sears, to eventually build apartments, an auto center and offices.

About 70 percent of WestShore Plaza has reopened, according to general manager Larry Scollo.

Scollo said the mall’s owner, Washington Prime, isn’t giving detailed updates on its redevelopment. He said the plan is moving forward, but announcements about its future won’t come until circumstances stabilize.

The virus is likely to bring more vacancies and at a faster rate than mall owners are prepared to manage. International Plaza planned to build an addition for its new project, but now it could have 150,000 square feet open if one of its anchor stores shuts down.

“Everyone from the small malls to the Mall of America has less time on the horizon to figure out how to ensure they have a relevant and sustainable business model,” Bowen said. “Some will stay the course, but I don’t see anyone being solely retail after this.”

The Commerce Department reported this month that retail purchases have plunged by nearly 22 percent over the last 12 months. In April, sales at clothing stores dropped 79 percent and department stores 29 percent compared to the same month last year.

Department stores have been struggling and shuttering for the last several years. Amazon and its fast shipping became the new general store. Walmart and Target began using groceries as a lure. Department stores have remained too general for shoppers drawn to niche experiences, according to experts.

Legacy brands have been working to adapt by growing online sales, creating outlet stores or launching specialty sections. But the sudden standstill from the pandemic worsened an already dire situation.

Beforehand, a department store closing would prompt redevelopment plans. A Sears or JC Penney could be broken into smaller, more in-demand spaces. That’s how Westfield Countryside mall got a Whole Foods.

But Noah Shaffer with Confidant Asset Management said it’s hard to imagine that in the current market.

“For the malls with vacant spaces,” he said, “Who is going to fill those?”

With an unsteady economy, it could be hard to win financial backing for a redevelopment. Malls looking at creative options have turned old department stores into offices. But Shaffer worries that those ventures could be riskier now. He said there could even be a surplus of office space because of people deciding to work from home.

The Dillard's at International Plaza is the only department store fully open. The others are doing a mix of curbside pickup or shopping appointments. [SARA DINATALE | Tampa Bay Times]

Experts agree the template for malls is changing. It’s not enough to be a shopping destination, no matter how top-tier the retail offerings.

At WestShore Plaza, a standalone dentist office is now located near the entrance to Macy’s. It might seem out of place, but such setups will become more common, said Phil Trocchia, a retail expert and professor at the University of South Florida’s Kate Tiedemann College of Business.

He expects future malls to house more doctor’s offices and services; department stores could become paintball arenas, or get leveled and turned into parks for more of an urban feel.

“Think ferris wheels, amusement parks, ski slopes,” Trocchia said. “Whatever stores are there now could be replaced by things you actually have to be there to do.”

Related: WestShore Plaza owners buy $4.3 million in land as part of new mixed-use development plan

***

Local entrepreneur J. Ricc Rollins II had been staking out WestShore hoping to find a storefront for a menswear shop, but the virus halted those plans.

He pivoted, instead, and now runs three kiosks under the name “Masked in Style” — two at WestShore and one at Tyrone Square in St. Petersburg. That has given him a front-row seat to see which businesses stay closed, potentially making room for his dream clothing store.

“They’re going to need to put something in the spaces, and it won’t always be a big chain,” Rollins said. “This is the opening local artisans and designers have been waiting for.”

For the mask business, he hired an out-of-work Neiman Marcus stylist from the store at International Plaza.

On a recent afternoon at International Plaza, Samantha Garber, 22, peered over the glass case of nose rings at a jewelry kiosk. Garber and friend Mia Traina, 20, were happy to walk the mall on a weekday.

“We do come here a lot,” Traina said, “and we missed it while it was closed."

Before picking up the nose ring, Garber hit Forever 21 for workout outfits. The duo planned to visit American Eagle. They like the instant gratification of bringing home exactly what they want right away, after getting the feel of something in-person.

Experts agree that appeal will remain and that brick-and-mortar shopping is far from dead — even as online shopping grows. But the virus has added unpredictable headwinds.

The two women pondered what stores they missed most, what ones they were sad were still closed, like Pac-Sun, Sephora.

They didn’t mention any of the department stores.

***

Just because a store chain files for bankruptcy doesn’t mean it will be gone tomorrow, or even next month. But in the current climate, it’s going to be a challenge for department stores in particular to come out the other end intact, said Stephanie Lieb, a Tampa bankruptcy attorney with Trenam Law.

Lieb said businesses typically emerge from bankruptcy court one of a few ways: They either sell the whole operation, sell parts of the company or come through it as a smaller company that’s been reorganized. Stores usually remain open, trying to make as much money as possible to pay off creditors.

But businesses are facing a lot of uncertainty, partly because no one is sure how long the virus will pose a threat. It has dampened consumer confidence and it’s unclear what buying power will be like with so much of the country unemployed.

“I think all those factors make a post-COVID Chapter 11 more difficult,” Lieb said. “On top of that, and because of that, it’s hard to predict future revenue or a company’s value and those two things are part of a bankruptcy plan.”

Those that survive likely will shed low-performing stores and reinvent their model to stay relevant — not an easy task during a pandemic.

The International Council of Shopping Centers has called for federal assistance to help retailers as they reopen. Stephanie Cegielski, a council spokeswoman, said the group has joined more than 60 other trade associations in lobbying the president for a grant program.

“Unless the government provides businesses with the means of paying employees, stocking inventories and protecting customers in the ‘new normal,’ businesses will have little choice but to close, devastating our communities and causing immense economic damage,” Cegielski said.

A woman works with stock in Victoria's Secret, which was still closed on May 22 at the Westfield Countryside Mall in Clearwater. The chain has announced it will close hundreds of mall locations nationwide, but it's unclear which ones will be affected. [DOUGLAS R. CLIFFORD | Times]

***

Bowen has been immersed in the world of failing malls for years, toying with their parts to figure out the future. He’s in the midst of redeveloping University Mall on Fowler Avenue into what RD Management is calling the Uptown District in Tampa.

RD’s vision is to turn the old mall into a research hub and village with offices, apartments and retail that feeds off the University of South Florida.

Bowen expects more malls to move toward creating what he’s in the beginning stages of at University Mall.

He struggles to see the department store remaining as a meaningful part of malls’ next iteration. To survive, they need to rethink what they offer and be less similar to one another.

His own property still has a Dillard’s outlet store but also a USF research lab.

What’s clear about the future?

“No one is going to go back to the way it was before,” Bowen said. “COVID-19 changed us.”

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