By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published Nov. 30, 2009

That familiar holiday landscape, the shopping mall, might look a bit sparser nationwide this season after more than a year of consumer caution has taken its toll on retail stores.

Vacancy rates at malls across the nation averaged 8.6% at the end of the third quarter, up from 6.6% in the same quarter last year and 5.5% in 2007, according to Reis Inc., a national real estate research firm. The vacancy rate in the third quarter was the highest in the company’s 10 years of data.

The scene at Charleston-area malls is varied. Some of region’s shopping malls and major retail centers remain nearly full, while others are seeing occupancy rates in the high 80% range.

Enclosed malls show different trends

Northwoods Mall in North Charleston, owned by CBL & Associates Properties, has an occupancy rate in the “high 90s,” said marketing specialist Leigh Burnett, who declined to give specific numbers.

According to the company’s 2008 year-end report, Northwoods Mall had an occupancy rate of 97%, or 3% vacancy, at the end of last year.

Her enclosed mall, Citadel Mall in West Ashley, which also is owned by CBL & Associates. Burnett said Citadel Mall’s occupancy is in the “high 80s.” The 2008 year-end report said occupancy last year was 84%, or 16% vacancy.

Burnett said Citadel Mall struggles more for tenants than Northwoods Mall because of its location. Much of the region’s residential growth in recent years has been in the north area.

“Northwoods is in a much more heavily trafficked retail corridor,” she said.

As growth continues down U.S. Highway 17 in West Ashley, Burnett predicts the mall will perform better.

“Which is not to say it’s not a healthy mall,” she said. “It definitely is still performing. It could be performing better, but it’s not on the brink of going anywhere.”

Losing Ritz, gaining Imax

Both malls lost their Ritz Camera stores this year as the chain went bankrupt. Burnett said that was the only national retailer lost because of bankruptcy. American Greetings Corp. also closed its Carlton Cards location in Northwoods Mall.

Authentiks, an urban wear retailer, opened stores in both malls, as did Little Athens Gyro, a Greek restaurant. Northwoods gained a Gorilla Grill and Japanese K in its food court.

In 2009, Burnett said Citadel Mall lost Old Navy as a tenant, but it quickly filled that 15,000-square-foot space with Shoe Dept. Encore. Dress Barn and Select Comfort mattresses also closed this year at the mall, and Books for Less opened.

A significant recent addition at Citadel Mall is the 50,000-square-foot Imax Theater, which opened in early October. The Imax Theater was built on the site of a former theater that closed in fall 2008. Burnett said the new, state-of-the-art theater is helping drive traffic to the mall.

Citadel Mall also gained a less-traditional tenant this year — the Charleston Area Model Railroad Club. Burnett said that the club has limited hours but that, when it’s open, “it’s a real draw for families and kids and anyone with an interest in model railroads.”

Sesame Burgers and Beer, a restaurant that’s part of the local Five Loaves Cafe chain, is under construction in the food court at Citadel Mall. Also under construction at the West Ashley mall is Planet Fitness, a 14,000-square-foot gym that took the spaces of the former Piccadilly restaurant and several other retailers. The gym should be open in December or early January, Burnett said.

Burnett said Citadel Mall continues to talk to potential tenants about different types of uses for space at the mall. “You just have to work a little harder in a recession,” she said.

Citadel Mall has experienced more turnover in the past year than Northwoods Mall, Burnett said, largely because more leases expired at Citadel Mall.

“Turnover is normal, it’s completely normal in any given year,” Burnett said. “Because of the economy, people are much more aware; they’re noticing more. But in any given year, half a dozen stores will turn over.”

Both malls count mostly national retailers among their tenants, she said.

Citadel Mall’s leasable area is 1.13 million square feet; Northwoods Mall’s is 780,701 square feet.

Depending on local business

In an economy that has many national retailers holding off on expansions, the malls are turning their focus more to local and regional tenants than it did 10 years ago, said Trey Lucy, a retail broker with Grubb & Ellis WRS Realty in Charleston. The firm works with CBL Properties to market some of the malls’ hard-to-fill spaces, he said.

Lucy said retail space has traditionally been more expensive in an enclosed mall than in a free-standing, non-anchored shopping center. That’s because malls cost a lot to operate and are attractive because of the traffic they draw.

Prime mall locations are still more expensive than most retail alternatives, he said, but malls are offering some price breaks for less-than-prime spaces in order to fill them, Lucy said.

The most expensive retail space continues to be downtown Charleston, where vacancies have remained low compared to suburban areas even in the recession.

Towne Centre down, Tanger Outlet nearly full

Mount Pleasant Towne Centre has been at 8% vacancy since September, said marketing manager Kristi Tolley. She said the center has ranged from 3% to 6% vacancy for about the past two years.

The number rose to 8% after two stores left the retail center this fall. Like the malls, Towne Centre lost its Ritz Camera store. And Oscar Thompson, a shoe and handbag store, also closed at Towne Centre at about the same time, Tolley said.

Among Towne Centre’s vacancies is the former Tweeter store, nearly 13,000 square feet that emptied last December when the bankrupt national chain closed. Tolley said there has been recent interest in the space, but no deal has been reached.

In the meantime, Towne Centre has made the best of the vacancy by using it as a venue for special events. So far, it’s been the site of a job fair, a designer show and a multi-author book signing. Special events bring the center’s core shoppers out along with people who might not typically shop there, Tolley said.

The Liz Claiborne store also went vacant last December. But a local clothing store, Teal, has filled that spot.

Tolley said most of Towne Centre’s new tenants in the past year have been locally owned shops. Newcomers include WineStyles, a franchise wine store; Discovery Ice Cream, another franchise; and Genealogy, a formal wear store.

She said the 10-year-old property, which has 452,000 square feet, strives for a good mix of national retailers with a solid draw for customers and locally owned stores. Towne Centre is owned by Institutional Mall Investors and managed by Bayer Properties.

Tanger Outlet Center in North Charleston has 3% vacancy, said Laura Dameron, assistant general manager.

The 352,000-square-foot outlet mall, which opened in August 2006, attributes its strength to its name-brand merchandise at discounted prices. While some people enjoy bargain-hunting in better times, right now they need a bargain, Dameron said.

Malls in context

Though malls nationwide have been challenged in the recession, they still tend to have lower vacancy rates than other retail types, said Tim Trainor, a spokesman for national real estate firm CoStar.

Nationwide, the vacancy rate for all retail types is 7.6%, according to CoStar’s data, compared with 5.4% for malls.

“There’s fewer of them — they’re specialized property types,” Trainor said about malls. “Many of them are newer, especially in the lifestyle center category.”

Lifestyle centers are often defined as outdoor shopping centers rather than enclosed malls. They can have a mix of commercial, residential and office space. Mount Pleasant Town Centre considers itself a lifestyle center, though it does not include residential space.

The average vacancy rate for all retail types in the Charleston market is 8.5%, a third-quarter report by Grubb & Ellis WRS Realty shows. That is up slightly from 7.8% retail vacancy a year ago.

Reach Ashley Fletcher Frampton at 843-849-3129.

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