Remember when we all thought malls — and by extension brick-and-mortar retail — were obsolete?
As someone with more fluency in French than I possess might say, “Au contraire, mon frère.” Like many pandemic-era trends that turned out to be far more ephemeral than we once believed, shopping in person has proven surprisingly resilient and is back in vogue — at least for some establishments.
And thanks to Brian Womack’s centerpiece feature, we are reminded that not all retailers are created equal — even if they’ve been walloped by COVID-19, inflation, tariffs and fickle shoppers. His detailed interview with Michaels CEO David Boone is a portrait of an executive tapping into a resurgent retail zeitgeist, with the wind seemingly at his back in the face of economic headwinds and fierce competition.
Don’t be fooled, however — tariffs, sticky price pressures and recession jitters are still major problems for retailers. The Federal Reserve Bank of Dallas’ latest Retail Outlook Survey painted a sobering picture for the sector; sales activity, labor conditions and the business outlook all contracted in October.
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Nevertheless, Boone told The Dallas Morning News that Michaels is in a “very unique position in the market, and that’s why we’re growing,” even as a number of industry peers navigate rough shoals. Fun fact: The chain actually maintains locations in every state bar one.
Michaels’ success is a window into a constantly whipsawed industry that, more often than not, can’t seem to catch a break. Yet lately, some retailers certainly have managed to do just that — and nowhere has the reversal of fortune been more dramatic than in shopping malls once left for dead.
What gives?
A key ingredient is shoppers who have gradually grown fatigued with exclusively shopping online, making their way back to physical stores. Revived foot traffic is helping to facilitate a massive wall of mall debt maturities that have been quietly reprofiled: data from TREPP shows billions in commercial mortgage-backed securities being extended, buying debt-saddled malls some much-needed breathing room.
To be sure, store closures and retail bankruptcies are still very much a problem. Meanwhile, Main Street is struggling with post-pandemic hangovers like soaring prices, an inability to hire enough staff, and the substitution effect that forces consumers into a relentless search for cheaper goods and services.
And retail is not entirely out of the woods yet, with TREPP reporting that nearly $19 billion of CMBS loans against 210 shopping mall properties are set to mature within the next year. More than $5 billion is classified as “nonperforming,” and almost $9 billion has fallen into special servicing, the platform notes.
Yet if a rising tide lifts all boats, high-end malls clearly have become the yachts within the treacherous waters of retail. Banks are extending credit to luxury shopping centers in both Texas and Florida, according to a recent report in CoStar, whose data also showed lenders ponying up billions of dollars worth of CMBS deals for mall properties at nearly twice the rate of the comparable 2024 time frame.
Which may explain why Galleria Dallas was ranked by USA Today as America’s third best mall — a well-earned accolade given how crowded the facility was on a recent weeknight when I ambled through its shops a couple of weeks ago. NorthPark Center, another one of my favorite D-FW haunts, is also similarly packed on any given day.
Lifetime — whose facilities are “more athletic country club space than a gym space,” CEO Bahram Akradi told me in a 2023 interview — is just one example of how retail’s physical footprint has evolved with the times. Most of the co-working/gym company’s locations are situated in or near walkable shopping centers that have contributed to the changing nature of what a mall anchor tenant should resemble. The new dynamics have given some retailers wings made of gossamer, while helping others stay aloft in a tumultuous environment.
It reminds me of something Matthew Whitman Lazenby, the CEO of Whitman Family Development — which owns Miami’s ultra-luxe Bal Harbour Shops — told me in an interview a couple of years ago. Despite all the blows retail suffered at the time, Lazenby was confident in his highly specialized model that catered to a niche (albeit an extremely wealthy one), and that location, diversification and finding new ways to connect with customers make the difference.
To be sure, wealth-centric shopping centers are a far cry from Michaels, but they both paint a similar picture: rumors of retail’s demise may have been greatly exaggerated.