Malls Turn to Candy, Rock Climbing to Lure Disappearing Shoppers

(Bloomberg) -- Lou Conforti, chief executive officer of shopping-mall landlord Washington Prime Group Inc., is betting on jelly beans.

Visitors to the company’s booth at the International Council of Shopping Centers’ annual convention in Las Vegas are greeted with a colorful self-serve display of candy, a plug for a project the Columbus, Ohio-based company is rolling out in about five of its 110 properties. Shelby’s Sugar Shop, Conforti’s own creation, will deliver an assortment of treats to shoppers via tricycle, based on heat maps of visitor traffic. 

It’s a part of the company’s effort to rethink how malls operate amid a seismic shift in the retail landscape that’s attracted investors betting against mall stocks and property debt. With online sales taking an ever-larger piece of the shopping pie, the goal is to inject more kinetic energy into a business model that’s become stale and static, Conforti said in an interview in Las Vegas.

“The industry has been lazy and reactive,” said Conforti, who joined Washington Prime almost a year ago from Tom Barrack’s Colony Capital Inc. A red baseball cap emblazoned with “Make Malls Great Again” sat atop the table in his makeshift office on the convention floor.

Malls Turn to Candy, Rock Climbing to Lure Disappearing Shoppers

Washington Prime is one of the many companies looking to make an impression this week at the massive retail conference. Representatives from the country’s largest landlords and property brokerages joined with lenders, lawyers, food chains such as Chipotle and Smoothie King, and companies specializing in everything from liquid fireworks displays to elaborate Christmas installations. CoStar Group Inc., a real estate data provider, raffled off a Tesla filled with $50,000.

Working, Partying

In many ways, the event resembled the other industry conferences Vegas regularly attracts. People wearing business-casual attire and name tags huddled for quiet discussions and shook hands before rushing off to their next meeting. At night, attendees loosened up over cocktails at parties held by big-name sponsors such as property brokerage Jones Lang LaSalle Inc. and DDR Corp., a Beachwood, Ohio-based shopping-center owner. The conversations grew more boisterous as convention-goers gradually peeled off to enjoy the city’s famous night life.

The festive setting belied the grim reality of accelerating store closures, rising bankruptcies and falling stock prices that are hammering retailers and the mall companies that house them. Malls are being targeted by hedge fund managers and distressed-debt investors, who have placed bets that would make them money in the event of mortgage defaults, and credit-rating companies have begun to downgrade debt backed by retail centers. There’s a palpable siege mentality among landlords who are working to evolve with the times while trying to battle the din in the media and on Wall Street surrounding the troubled retail landscape.

“I have never seen a greater inequity between the perception and reality than today in the retail space,” said Conforti of Washington Prime.

The mall isn’t going away, but what consumers want in a mall is changing, according to Michael Goldban, head of retail at Brookfield Property Partners LP. Today’s shoppers want to be entertained, meaning traditional stores will take up less space at the shopping centers of the future, he said.

Ice Rink

“Brookfield spends as much time thinking about the utilization of our public spaces as we do about our tenant mix,” Goldban said. Brookfield Place in downtown Manhattan has an ice rink during the winter and concerts and art shows over the summer.

As mall owners focus more on experiences that can’t be found online -- anything from adding restaurants to building a rock-climbing gym -- they are revamping existing properties rather than developing retail centers. That change can be seen at the exhibit halls in Las Vegas, which showcased new developments in years past, said Stephen Lebovitz, CEO of CBL & Associates Properties Inc., a Chattanooga, Tennessee-based mall operator that has its roots as a family business that owned movie theaters.

“It’s about redevelopment,” he said, “not building from the ground up.”

Some companies attending the conference are expanding. Beef Jerky Outlet, a franchiser that started in 2012, has been coming to the convention for several years. Store customers can sample the product before buying -- something harder to do online. Beef Jerky Outlet will open its 100th location in July, said Paul Lyons, the company’s president.