Wall-climbing gyms, medical care facilities and other businesses outside the scope of conventional retail are increasingly taking up residence at U.S. shopping malls, Bloomberg reports.
These types of businesses help diversify the tenant mixes for landlords, provide customers with interactive “experiences” distinct from shopping, and don’t face competition from the likes of Amazon and other online retailers.
Many non-retail tenants face high costs and are required to sign longer leases because of their unique needs. John Dahlstrom, property manager at Wasatch Commercial Management, told Bloomberg that a mall he oversees required a rock climbing gym to sign a 20-year lease, rather than the typical five: “That’s part of the dilemma with this,” he said. “At the end of the lease term, it’s their cost and not the landlord’s cost to remove all those things and then make the building back into something that we can use.”
The U.S. finds itself with an excess of malls. While there are 1,100 enclosed malls nationwide, retail analyst Jan Kniffen recently said that number should be more like 700. “The top 250’ll do fine, and the rest of them are going to struggle,” he told CNBC in May.
In the scramble to fill space, malls are now trying to lure customers with restaurants, movie theaters and now gymnasiums and healthcare—in short, experiences that don't face competition from e-commerce.
“The traditional model for malls has been 70% retail and 30% food and entertainment,” retail futurist Doug Stephens told Retail Dive earlier this year. “Mall developer Allan Zeman maintains—and I agree with him—that those numbers now need to be inverted. Shopping centers should be community hubs, social gathering points, and entertainment complexes that also happen to have an assortment of awesome retail. We don’t need more retail, we need better retail. We don’t need more malls, we need special places that communities value and gather in.”
The diversity of tenants is a reflection of areas of the economy that are growing, like rock climbing gyms and walk-in medical clinics, and that need space and prime locations with parking lots. They also reflect customers’ increasing priority to spend their money on activities rather than on clothes.
“Until Amazon invents a way to go rock climbing online, we are not going to be at risk of becoming a short-lived tenant for these landlords,” Jeff Pedersen, CEO of Momentum Indoor Climbing gym in Salt Lake City, told Bloomberg.