As Maryland enters the second phase of reopening the state’s economy, many nonessential businesses, including high-contact services like tattoo parlors and nail salons, are gearing up to reopen, albeit with limitations.
Malls and indoor shopping centers, however, remain closed. And “the longer [mall retailers] are closed, the more dire the situation becomes,” said Towson Town Center manager Emily Brophy.
Malls and shopping centers were already in decline before the coronavirus pandemic led to government-ordered closures to contain disease spread, said Daraius Irani, vice president of strategic partnerships and applied research at Towson University.
As consumers, “we were over retail to begin with,” said Irani, citing the rise of online retail in the past two decades.
With shoppers buying more and more online, many department stores and big-box retailers have struggled to survive, leaving the sprawling shopping centers and malls that housed them in just as precarious a position. In a 2017 report, analysts at global investment bank Credit Suisse forecast that about 20% to 25% of U.S. malls would close by 2022.
Now, with retail sales dropping 16.4% in April and 8.3% in March, “this COVID problem has expedited that,” Irani said.
“It was challenging to be a mall owner pre-COVID, it’s more challenging during COVID, and will still be a challenge post-COVID,” he said.
“Retail has never stayed static. It’s always going through changes to accommodate consumer changes. This is just one more thing to factor in.”
Daraius Irani, vice president of strategic partnerships and applied research at Towson University
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Under the state’s Phase 2, as of last Friday evening, retail businesses, religious facilities, barbershops, beauty parlors and other personal-service establishments, like tattoo parlors and nail salons, were allowed to reopen at no more than 50% capacity.
Baltimore County Executive Johnny Olszewski Jr. announced last week that the county will follow the state guidelines; prior to that, the county had been more restrictive in reopening. Anne Arundel, Carroll, Harford and Howard counties also have moved in step with the state’s gradual reopening while Baltimore City has been slower to ease local restrictions lifted by the state.
Before retailers were permitted to partially reopen, Brian Gibbons, CEO of Greenberg Gibbons, said revenue for the commercial real estate management company had been cut in half. The company gets rent from retailers and other tenants at its six Baltimore County locations, including the Hunt Valley Towne Centre on Shawan Road and The Shops at Kenilworth.
At Kenilworth, the strain may not be obvious. Long lines persist outside Trader Joe’s, and retailers like South Moon Under were adjusting in April to edicts allowing curbside pickup. But the indoor portion of the Kenilworth shopping center remains closed for the foreseeable future, and behind the scenes, Gibbons said the company has been allowing tenants to defer rental payments.
He said he expects some will not be able to recoup the losses and reopen.
“It might take six to 12 months, but over a period of time we will get back to full occupancy,” Gibbons said.
At properties owned and managed by Kimco Realty, which include Towson Place and Timonium Square, Tom Simmons, president of the company’s mid-Atlantic region, said in an email that impacts to shopping centers “have been significant but varied.”
Essential retailers in Kimco’s shopping centers, like Giant Food and Weis, Target, Costco and PetSmart, have seen “unprecedented sales growth” during the pandemic, Simmons said. But sales for nonessential stores that had been closed since March, like T.J.Maxx, Marshalls, Homesense and Burlington Coat Factory have been “significantly impacted.”
Retailers that have been shielded from the worst of the shutdown are those with an already established online footprint, but “not everybody is set up for that,” said Towson Town Center’s Brophy.
Even with curbside pickup authorized by Baltimore County in mid-May, the mall that once saw around 50,000 visitors on a typical Saturday hasn’t “really been able to get sales going,” Brophy said.
Currently, 19 of the 180 stores at Towson Town Center are open for curbside pickup, including Nordstrom, Macy’s and Pandora. Despite the order that retailers are able to open their doors at 50% capacity, stores at the mall remain shuttered for now.
The coronavirus has pushed some already struggling retailers over the edge. National chains such as JCPenney, J.Crew, Lord & Taylor, Neiman Marcus and Pier 1 have filed for bankruptcy, with Pier 1 choosing to just liquidate.
Even when stores are permitted to reopen, widespread layoffs in the retail industry mean that the process won’t be easy.
“Regardless of when they start reopening, [store] closures will continue,” Irani said.
Brophy said Towson Town Center has developed a reopening plan that includes reduced mall hours and limited foot traffic, mandated face masks, setting out social-distancing guidelines for shoppers and more frequent and intensive sanitation.
Shoppers will need to take “personal responsibility” for social distancing and minimizing foot traffic because enforcing such measures would be difficult for mall managers, Brophy said.
Prior to the pandemic, Irani said, many commercial real estate companies already were envisioning a path forward to stay economically viable: mixed-use development.
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Some malls have starting leasing space to tattoo parlors, he noted. Towson Town Center in December opened doors to the Round One bowling and entertainment center. The Mall in Columbia opened a similar venue called Main Event in 2018, replacing the second floor of the Sears store.
Other commercial real estate companies are exploring options to create a work-play-live environment, like Greenberg Gibbons’ Towson Row development in central Towson that includes student housing and a plaza with outdoor seating and retail space, anchored by Whole Foods.
Kimco, too, has submitted a zoning change requests to the county to add residential housing to its commercial properties — Timonium Square, Shawan Plaza, Fullerton Plaza, Putty Hill Plaza and Radcliffe Plaza.
“I think that’s where a lot of this will go,” Gibbons said. “It’s really kind of the way of the of the future, work-live-play environments.”
Irani said shopping centers will survive the economic fallout of the coronavirus pandemic, although the form they might take at the end is unknown.