Loss may prove a hard blow to malls

Local Impact

August 05, 2008|By Lorraine Mirabella | Lorraine Mirabella,Sun Reporter

Three Baltimore-area regional malls could be left with gaping holes for years or even fail when they lose Boscov's department store as an anchor, real estate and retail analysts said yesterday.

Because of a slowdown in consumer spending, few retailers are looking to expand and some are in a fight for survival, which could make it tough to fill the large stores being vacated by Boscov's. The chain said yesterday it would shut its two-year-old department stores in White Marsh Mall, Marley Station and Owings Mills Mall in a Chapter 11 bankruptcy reorganization.

The timing could be off as well for the malls' owner, General Growth Properties, to convert those anchor spaces for new uses such as restaurants or entertainment, analysts said.

In the past when retail chains closed stores or folded - among them Montgomery Ward, Woodward & Lothrop and Hechinger - stronger chains filled in the space, said David M. Fick, a managing director with Stifel Nicolaus. But only a handful of mall-based department store chains are left, as consumers have taken their business to discounters and specialty chains, which themselves are locked in tough competitive battles.

"This time, there does not appear to be that next wave of tenants ready to absorb the space," Fick said. "There is virtually none. These spaces are likely to remain dark ... at least five years or longer."

The strongest of the three malls, White Marsh, may have an easier time reusing the Boscov's space for a movie theater, restaurant or other entertainment tenant - or even housing, because it is located in a growing residential area.

But Marley Station and Owings Mills Mall, both of which are struggling, may not have much of a future as traditional malls, analysts said.

A spokesman for General Growth said yesterday that he had no information about options for the Boscov's spaces, which the chain plans to leave within two months after liquidation sales.

"It's too soon to say what's going to happen with those spaces," said David Keating, the spokesman.

Owings Mills Mall, which opened in 1986, has over the years lost original anchor Saks Fifth Avenue as well as Sears and Lord & Taylor, and is now struggling with high vacancies and a slowdown in foot traffic.

"Poor Owings Mills, they can't get a break," said Mark Millman, president of Millman Search Group, an Owings Mills executive search firm specializing in retail. "It's like a ghost town. This will make it a worse situation for all the other retailers that operate in the mall. If a retailer was on the fence about re-signing [a lease], this could be the nail in the coffin. The mall concept has not proved it's workable."

Millman said it would be nearly impossible to attract another large anchor there.

"Nobody's going to come in," he said. "I can't think of one retailer who would ... in today's economic climate, even with free rent, in Owings Mills Mall. It's a sad sign of the times, and there is more to come."

Yesterday at Marley Station in Glen Burnie, the manager of a small convenience store next to Boscov's said that business has already been unusually slow this summer. Sheraz Kahn, the manager of New Services Unlimited, said his father, the store's owner, might consider closing once Boscov's is gone.

And at Race-Wear, a NASCAR-themed store near Boscov's, employee Martha Sawyer said that her store depends on foot traffic from Boscov's. As a lone father and son wandered the store, she said that business has been poor the past few months.

"Here lately the mall's been pretty dead. I don't know if it's vacation or the economy and people don't want to spend their money," she said. "I think [Boscov's closing] will hurt sales, but I don't know how much with Sears, Macy's and Penney's still here."

The Owings Mills and Marley Station malls have been eclipsed by newer or expanded malls or hurt by demographic shifts in their areas, Fick said.

Shoppers from the Green Spring Valley and Pikesville areas of Baltimore County often bypass Owings Mills to shop at Towson Town Center, while Marley Station has been hurt by the proliferation of "big box" stores and discounters, the opening in 2000 of Arundel Mills mall and the expansion of Annapolis Mall.

"Those things continue to diminish Marley Station's presence," Fick said. "And it's already challenged by weak demographics to the north in Glen Burnie, where shoppers aren't going to support high-end shopping."

Those malls could end up, like the former Hunt Valley Mall, struggling for a number of years before being razed and redeveloped, Fick said. Hunt Valley was turned into a "main street" style center.

Despite the potential damage to the malls themselves, their owner, real estate investment trust General Growth, will likely weather the loss with little trouble. The company's earnings should not be affected by the loss of Boscov's, Fick said.

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