Mall Owners Ramp Up Holiday Spending in an Era of Diminished Expectations

Efforts to draw customers include cooking classes, skating rinks, pet adoptions and Santa.

Source: Esther Fung, The Wall Street Journal

The biggest mall and mixed-use center landlords across the U.S. are digging deep into their pockets to attract customers this holiday season, rolling out everything from winter castles and Santa sightings to gingerbread-making classes and temporary skating rinks.

But they are under no illusion their efforts will bring windfalls to them or their tenants.

Fully aware that most consumers nowadays intend to do at least some portion of their holiday shopping online, many landlords will be happy if the people coming in to ice skate make a few impulse purchases along the way.

“You do have to make a certain amount of investment,” said Barbara Garnett, general manager of a mixed-use project Atlantic Station in Atlanta, which opened a seasonal outdoor ice skating rink and held a Santa parade at its outdoor retail center on Saturday. The owner, property giant Hines, has been spending more in recent years for its Christmas events and décor, but believes it is worth it, Ms. Garnett said.

Landlords are investing more these days to spruce up their properties to differentiate themselves from others and from online shopping channels their tenants also are promoting. Relying on Black Friday to generate buzz isn’t enough any longer, especially since it has been losing its relevance as retailers roll out discounts earlier in November.

“We don’t see those long lines at 3 a.m. anymore,” said Ms. Garnett. But “if I can get you here, you’re most likely to visit other stores or stay and watch a movie.”

Individual malls often spend $150,000 to $500,000 on holiday decorations, said Greg Maloney, chief executive officer of JLL’s retail business in the Americas.

“People want to be festive. They want to be entertained,” said Mr. Maloney. “When we started pulling back [on Christmas décor and events] we got a backlash.”

An estimated 69% of Americans, or 164 million people, plan to shop during Thanksgiving weekend, according to the National Retail Federation’s annual survey conducted by Prosper Insights & Analytics, up from 154.4 million last year. Some 54% of consumers plan to spend about the same amount of money as last year, while 24% plan to spend more. Survey respondents said they plan to spread their holiday purchases across different channels, including online sites, department stores and other stores.

The retailers themselves have asked landlords for more cosmetic upgrading to their stores before Black Friday, such as lighting fixtures or a fresh coat of paint to make their stores brighter, especially the area where the cash registers are located, said Bill Hayden, chief executive officer at FacilitySource, a facilities management company that oversees 120,000 stores across the U.S. for more than 80 retailers.

This year, there was an 8% to 10% increase over last year in holiday preparation work orders, Mr. Hayden said.

Landlords of lower-tier malls in less-well-off places can’t invest as much on elaborate Christmas décor or events, which in turn could accelerate their spiral into irrelevance, especially if they are competing with newer retail centers nearby that have flashier offerings.

But owners of “A-class” malls and more productive mixed-use centers have resources to be more creative. Rather than a single-minded goal of increasing sales per square foot, these landlords said their focus is on creating loyal customers.

At North Hills, a mixed-use property with an open air mall in Raleigh, N.C., the tree lighting ceremony last Saturday drew an estimated 10,000 people, according to its owner, Kane Realty Corp. The landlord is also organizing holiday-themed cooking classes for families and pet adoption drives in its pop-up shop area to draw foot traffic.

“Does it drive sales when they are here? Maybe, maybe not,” said John Kane, chief executive officer of Kane Realty. “But it gets people in the habit of coming here.”

While sales revenue is expected to go up this season, some analysts are concerned about the expense of such events and the extended hours, wondering if these efforts will pay off for retailers enough to preserve their leases.

“It’s costing them a lot of money driving those sales,” said Mark Cohen, director of retail studies at Columbia Business School and a former executive at Sears Canada Inc. and other department stores. He added that consumers generally stick to fixed budgets during the holiday season, and for some retailers the costs of keeping a store open for an extra day — more staff expenses due to extended hours and higher facilities management costs — might not be covered by the sales receipts.

And yet, cutting back on Christmas décor and events isn’t an option.

“Even if your profit shrinks, it’s either that or you fail. Retail is a difficult business to be in. You need to go where the consumer wants to go,” said Mr. Maloney.

About FacilitySource, LLC

FacilitySource provides innovative, end-to-end facilities maintenance solutions to leading companies with large, dispersed real estate portfolios. FacilitySource provides clients with deep insights, collected from the industry’s largest facility maintenance platform, best-in-class service through an elite network of service providers, access to proprietary technology and a flexible approach that enables them to elevate the performance of their facility maintenance processes. Learn more at FacilitySource.com.