America’s dying shopping mall has a surprise recovery in store

The Dayton Mall has been a shopping staple for residents of Dayton, Ohio, since it opened in 1970.  The once-prospering mall, like many, has faced hard times with increased vacancies, exacerbated by the closing of two anchors, Sears and Bon Ton, in 2018.

As a result, the mall was put into receivership, where it remains. But the 162,000-square-foot former Sears space was sold to a local church, Crossroads, which has transformed 90,000 square feet of the former store into a house of worship and community hub with a traditional indoor entrance to the rest of the mall.

“Nothing says dying mall like having a church move in,” said Rebecca Maguire, marketing manager of the Dayton Mall. “But Crossroads has a huge following, and they are so community driven that I think any mall in the world would be lucky to have a partner like that.”

It’s fair to ask if a struggling mall is the right place for a church, and Matt Castleman, the pastor of Crossroads Church in Dayton, said the religious organization had its own reservations.

“People were asking, is chaining yourself to a mall wise?” said Castleman.

The church, part of an eight-church network based in Cincinnati, celebrated its first services on this year’s Easter Sunday and has drawn thousands to the once moribund mall. The church also decided to keep the complex open seven days a week, whenever the mall is open.

“We have 400 to 500 people a week pop in who have no affiliation to the church,” Castleman said.  Teenagers fan the mall after services to eat at the food court and show back up at the church with bags from stores like Claire’s and Dick’s Sporting Goods, Castleman said.

Of course, Claire’s bankruptcy filing this week is one more sign of how the hard times for long-time mall tenants are not going away. But filling old anchors with new, niche businesses or destinations, like in the case of the Dayton Mall with its new church tenant, is precisely the type of “cross-shopping” mall landlords are seeking.

While a church is the unconventional salvation of the Dayton Mall, other malls are also finding out-of-the-box suitors to fill big empty spaces.

The fall of the American mall has long been chronicled, and not exactly greatly exaggerated. Enclosed malls with anchor stores, a bustling food court, and a stable of trendy fashion retailers sandwiched between were the centerpiece of post-WWII suburbia for generations. However, changing demographics, shifting shopping habits, and the rise of Amazon and e-commerce all contributed to the decline of malls.

But recent data and industry executives suggest that the enclosed mall could be positioned for a rebirth.

The trend of repurposing empty anchors, which in some cases began a decade ago, took a long time to bear fruit, said Stephen Lebovitz, CEO of CBL Properties, one of the largest mall landlords in the U.S. with more than 155,000,000 square feet of mall space.

“We have had a rebound and built a lot of positive momentum. These projects to backfill anchors don’t happen overnight,” Lebovitz said. And even when the old anchors were filled relatively quickly, it can take time to break through to customers.

“It has taken several years to recover from anchor closings in 2017-2018,” Lebovitz said, referring to a wave of anchors that closed that year. The past decade has seen traditional anchors like Macy’s, JCPenney, and Sears shutter.

The subdivided mall and ‘cross-shopping’

Lebovitz said the key to success is subdividing formerly sprawling anchor stores into niche players that all draw in their cross-shopping constituencies. There are former Sears’ locations in the CBL portfolio that were generating $7 million to $8 million a year, with newly filled, subdivided ones bringing in a combined five to six times that amount, according to Lebovitz. A variety of different businesses are filling those voids, from restaurants like The Cheesecake Factory, to large retailers like Dick’s Sporting Goods, entertainment options like Dave & Buster’s, or hotels. 

Lebovitz said that mall developers are also trying to add more experiential categories, such as games, bowling, and laser tag.

Other mall owners are taking it even a step further, converting old stores into things like apartments or large food courts.

Brookfield Properties, another major mall landlord, is seeing similar success from the same playbook.  Brookfield’s mall portfolio is more upscale, insulating it from some of the retail turmoil, but they’ve still had to repurpose some anchors (or “reprogram the box” in industry parlance).

“Gen Z loves the mall; they love the experience of the mall and being in person with each other at malls,” said Kirsten Lee, executive vice president of luxury leasing at Brookfield Properties. Lee points to the post-Covid experience as a turning point when people…