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PINPOINTING THE MALL POPULATION

By Michael Baker

Just how many regional or super-regional malls are out there? After several months of scouring directories, company financial statements, Web sites and electronic databases, ICSC’s Research Department believes it has come up with the right answer — or at least as close to the right answer as you’re ever going to get when the target is constantly moving like this one.

Why is a simple and accurate inventory of malls so difficult to come by? There are essentially five reasons:

First, there are definitional problems — although ICSC has a well-publicized list of shopping center definitions, there is sometimes confusion about what constitutes a regional mall or a community center or some other type of project.

Second, the mall population is in a constant state of flux, with openings, closings and redevelopments, making it virtually impossible to keep an exact count of how many malls are “living and breathing” entities at any given moment.

Third, it can serve the purpose of some to dramatically overestimate the number of malls in existence. For example, whenever a competitive threat (or perceived competitive threat) to malls emerges, it always makes better newspaper copy if the number of malls at risk is large rather than small.

Fourth, up to now, there simply have been few serious attempts to inventory and monitor the growth of malls at all. This is unfortunate because they are an icon of American life and one of the most important retail distribution channels. Malls have distinctive physical characteristics compared with other shopping center types, which impart a unique set of operating characteristics.

Fifth, directories that compile shopping center information rely to a large extent on the self-reported center type of the owner/developer or management company. Since these entities don’t apply a common definition, one person’s mall is often another person’s community center.

Using a number of sources, ICSC set out to compile a comprehensive inventory of regional and super-regional malls, and their basic ownership and physical characteristics. Caveat: ICSC Research is the first to admit that no inventory will be perfect, for some of the reasons enumerated above. However, this initial foray will enable ICSC to monitor the growth (or diminution) and evolving characteristics of the regional/super-regional mall segment going forward.

ICSC began its long count of malls armed with a shopping center typology first developed by the ICSC Research Advisory Task Force in 1994, and reviewed by the Task Force as recently as 1999. Among other characteristics, regional malls are typically enclosed, occupy 400,000-800,000 square feet of gross leasable area (GLA) and have two or more anchors — at least one of which is typically a full-line department store. Super-regional malls are similar, but larger than 800,000 square feet and offer a correspondingly greater number of stores. (The full typology can be found on ICSC’s Web site at www.icsc.org/srch/lib/SCDefinitions99.pdf.)

ICSC used the 3,600 centers in the Directory of Major Malls as a starting point for constructing a list of authentic malls. Research staff examined every center in the directory and analyzed its characteristics for conformance with ICSC definitions of a regional or super-regional shopping center. After identifying a listing as a mall candidate, ICSC made strenuous efforts to verify the continuing existence of that mall and document its most up-to-date physical and ownership characteristics. In some cases, this verification process resulted in eliminating the center as a mall candidate — e.g., investigations revealed that, due to reconfiguration, a center simply no longer fit the definition of regional or super-regional mall.

As a result of this process, ICSC was able to verify the existence of 1,182 regional and super-regional malls, which is significantly less than most estimates. Tables 1-3 depict the basic characteristics of these malls, presented by type of ownership (REIT or non-REIT). REIT-owned malls are, on average, larger (in excess of 53,364 square feet) and slightly younger than non-REIT-owned centers. In the case of jointly owned properties, a center was considered REIT-owned if at least one of the owners was a REIT company.

Anchors comprise 57% of total mall GLA, which is close to the midpoint of the ICSC guideline that 50%-70% of a typical regional/super-regional mall’s space is turned over to anchors.

In all, 79% of all mall anchors are department stores . More than 95% of malls have at least one full-line department store anchor . Alternative anchors, such as discount department stores, apparel and off-price stores, are more prevalent in non-REIT-owned centers, which are also more likely to be small regional centers. This is not surprising, since many small centers have had a tough time remaining competitive against their larger brethren and have had to draw on a more diverse range of anchor types. ICSC was able to identify 50 malls that had no department store anchor at all, and these centers were 272,000 square feet smaller than those with at least one department store.

ICSC will continue to monitor the evolution of the regional/super-regional shopping center segment and add information to its database. Given that new mall construction activity is light, the challenge will be to keep track of renovation and redevelopment activity at older centers to determine whether they continue to fit the definition of what constitutes a regional/super-regional center.

Michael Baker is director of research for ICSC.

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