Lifestyle centers: with Saucon Valley, neither lively nor stylish.

Now that the holiday season is long behind us, we can only hope to rebound from the latest wave of contractions among our perpetually ailing retail sector. You know what I’m talking about. After dismal holiday performances, chains like Sears, Kmart, and Macy’s announced a slew of nationwide closures.  Meanwhile, smaller, specialty retailers The Limited and Wet Seal folded completely. These announcements deliver yet another series of left-right punches to the already battered and bruised American icon to commercialism: the enclosed shopping mall. Of the malls that will soon bid farewell to their Sears or Macy’s, many have already doffed another anchor department store in the previous five years, and few have found a replacement that would use these large floorplates to their full capacity. It is hard to conceive of a mall that can continue to operate successfully if two of its anchor tenants are gone; many malls only have three altogether (and some only have two). The Eastland Mall in Columbus, for example, will be losing its Macy’s by spring; two years ago the J.C. Penney departed. Before that Eastland bade farewell to Lazarus, which reveals how long that space has remained vacant, since Lazarus hasn’t existed in any form since Federated retired the name to favor Macy’s in 2006. Thus, Eastland will have only Sears, and I’ve ruminated many times on the anemic presence of a Sears, even in the healthiest of malls.

It’s not looking pretty. While not every mall in the country is swirling around the toilet bowl, the volume of struggling ones has discouraged much new retail construction in the last few years. Enclosed malls simply lack their prior appeal, even as recently as the previous decade. Shopping typologies of comparable scale have pulled customers in other directions: among the most shameless is the power center, which amounts to little more than a series of big boxes and strip malls lined up end-to-end to form a square, rhombus, or some other configuration that features a parking lot smack in the middle. They require considerably less common area maintenance cost, are invariably auto-oriented (customers drive to different spaces in the parking lot to get to the stores they want) and usually aesthetics are nary a passing thought. They’re an unattractive imposition to exurban greenfields, but they’re awfully convenient, so people keep going to them for now. I’ve yet to find a power center with more than a 25% vacancy, so, in most respects, they’re flourishing, but I know failed power centers do exist out there, and I cannot imagine the negative visual impact of a blighted power center to the community nearby.

Then we have the lifestyle centers. I’ve rarely covered this form of retail here on this blog, but they merit an article of their own, because as recently as 2005, they seemed to represent the next generation.  Malls were dying in the early 2000s, to be sure, but not at the pace of today, and experts on shopping trends largely attributed the early generations of dying malls to two factors: 1) neighborhood change (the median income and purchasing power of the surrounding area steadily declined) and 2) competition from newer, flashier malls (which opened close by and stole away the tenants and customers). Lifestyle centers played a seminal role in the latter, because, while they more or less operate other the same shopping principles as an enclosed mall—and often feature many of the same stores—they were a relative novelty at the turn of the 21^st century. And new shopping experiences often turn heads.

But the lifestyle center trend has never supplanted the enclosed mall; most large metros have at least one, and they’re widespread across the more temperate climates. But they certainly haven’t morphed into “the next big thing.” Meanwhile, malls have only continued to slide in their pre-eminence; the last major enclosed mall construction—the Mall at Turtle Creek in Jonesboro, Arkansas—took place in 2006. Not a single developer has built another one. While lifestyle centers (or some hybrid between the lifestyle center and the power center) have scattered lightly across greenfields since then, shopping in the 2010s increasingly lacks a physical component. And, by 2017, the reason is obvious to just about everyone: the Internet has taken over.

Online shopping in general (and Amazon in particular) has become factor #3 in hastening the decline of the enclosed mall. By the early 2000s, it was clear that the Internet was stealing a significant chunk of revenue away from the bricks-and-mortar retailers. When two national, high profile big boxes—Circuit City and Borders Books—declared bankruptcy around the end of the decade, the prevailing sentiment was that they had failed to align with shifting consumer preferences. Their departures cast a pall on the suburban, commercial landscape, visibly escalating the big-box vacancy rate. But neither of these chains (especially Circuit City) had particularly strong connections to enclosed malls. Less than five years later, however, the major department stores are facing similar challenges, despite developing reasonably robust online components. Macy’s, Penney’s and Sears still can’t compete with Amazon. Even the most well-managed discount chains—Kohl’s, Target and Walmart—have felt the pinch.

So malls are in serious trouble, but what’s the situation with those lifestyle centers?   I’m not particularly sanguine about them either.The above photos, featuring the Promenade Shops at Saucon Valley (just south of Allentown/Bethlehem, Pennsylvania) help demonstrate why. Having opened in 2006, this lifestyle center is not a big one: it features less than 500,000 square feet of space. It has no conventional department store anchors, or even a budget big box. The best-known chain of any real size is Barnes and Noble, but it also features an upscale specialty grocer (Fresh Market) and a 16-screen Carmike movie theater change with IMAX. Everything else at this would classify as an inline store.

At first blush, the Promenade Shops at Saucon Valley seem to be doing well enough. And these photos, near dusk on a chilly Monday, hardly capture the installation at its customer peak. For the Pennsylvania’s Lehigh Valley—the state’s third largest metro area—it represented the region’s highest concentration of mid-to-upscale shopping when it opened, with the only Banana Republic, Brooks Brothers, and L. L. Bean. It features the conventional main street configuration, with the aforementioned mini-anchors poised on both ends and the middle.The immediate center of the development features a Starbucks overlooking a plaza with a mini-amphitheater seating and fountains, open to musicians and splash-play in the warmer months.

But even in the dead center of it all—and the middle of malls or lifestyle centers tend to be the strongest, highest-value portions—it’s still easy to find signs of vulnerability. Notice the vacancy to the left of Pandora in the space below:And another vacancy in the background, to the far left. Let’s get a little closer to that storefront space, distinguished by the mosaic ornamentation above the windows.It’s clearly not operational, but there’s some sign of activity; a worker was moving things around when I came by. What’s going on? Here’s a closer look:

It is—or at least was—the gift shop Go! Calendars Games and Toys. I’ve noticed that this emergent chain tends to gravitate toward cheaper locations in many malls (i.e., the spaces closest to Sears), but here it was in the dead center. And it seems to have closed. But what does the sign in the door say?

It’s operating as a seasonal store, no doubt to cash in on the demand for calendars around Christmas. It’s inevitable that even the most successful malls will feature at least a few storefronts that they lease on a seasonal basis. But it usually isn’t smack in the middle of it all.

Lifestyle centers, not surprisingly, must face the same challenges as malls when a tenant fails nationally. Here’s another example where the labelscar is easy to discern.As of February 2017, Aéropostale hasn’t yet faced the same fate as Wet Seal, but national mall managers Simon Property Group and General Growth Properties have essentially placed the once-thriving brand on life support. It might be hospice care.   Over one-eighth of the Aéropostale locations have closed in the last decade. This region still claims one location—at the Lehigh Valley Mall (the most successful enclosed mall in the area)—but it closed the others. And, like many malls faced with rising vacancies, the Promenade Shops must get creative at decorating the storefronts to keep the illusion of vitality.

However, the real weakness to this lifestyle center is not so much the tenants it has lost, but those it still retains. Another storefront that faces the center plaza also hints at struggles.Capital Blue is a division of Blue Cross Blue Shield of Pennsylvania, so essentially this is a customer service outlet for purchasing, filing claims, or simply asking questions in regards to health insurance policies. It’s a strange tenant for a lifestyle center, since it’s unlikely to attract the recreational shopper, and its hours don’t synchronize with most other retailers. And it has leased space at the Promenade Shops Saucon Valley for quite some time. Just a few hundred feet away—and also facing the central plaza—we encounter another inauspicious tenant.

I have nothing against Sneaker King, but it’s a recent addition to the lifestyle center’s portfolio. And, if you look closely at the labelscar, you can see what preceded it.Barely visible traces of the letters “e-e-k”. It was Coldwater Creek, a women’s apparel store that declared bankruptcy in 2014. The brand survives online, but it no longer has any real bricks-and-mortar presence. Since the brand failed, it’s hardly a black eye to the Promenade Shops. But I’m confident that Coldwater Creek was a more upscale tenant than Sneaker King. Since the latter chain has locations elsewhere in the Lehigh Valley, it’s hardly a coup for this lifestyle center to secure the store as a new tenant. In other words, the Promenade Shops downgraded.

And here are two others:Journeys and PacSun are hardly low-end tenants, but they’re staples of middle class malls—hardly the stuff for a lifestyle center that seeks to distinguish itself as eclectic. Both also operate at the Lehigh Valley Mall several miles away, and, while I don’t know about Journeys, PacSun is hanging on by a thread, saved from bankruptcy by a private equity firm. No better than Aéropostale. And, a hundred feet further, a case of the doldrums:Then, on the other side of the lifestyle center’s main street, we see another predictable tenant:The grainy quality makes it tough to interpret, but it’s the omnipresent GNC. From what I can tell, the financials of nutritional supplement stores like GNC are strong, so it’s got that going for it. But GNC has over 6,000 locations in the US alone, and it’s such a predictable staple for a mall that it only further undermines the Promenade Shops’ goal of bringing in a choosy clientele. Additionally, GNC has achieved particular notoriety as one of the final tenants in dying or nearly-dead malls across the country. At least they’re resilient.

Truth be told, this lifestyle center in particular seems to recognize that retail has proven a persistently shaky foundation upon which to generate cash flow. And the management has responded by shifting the focus toward dining.

The primary travel lane along the front of the premises, parallel to Center Valley Parkway, is called Restaurant Road. The majority of the storefronts that motorists would see as they drive by are, in fact, restaurants.These days, relatively few of these high-profile locations are widely known chains. Only Cosí and Bar Louie. But the remaining, while local, still appeal to an upscale clientele. And the lifestyle center’s management seems to be catching on:I can’t imagine a “Restaurant Week” at a conventional mall. Most malls feature fast-casual eateries in their interior, usually clustered in a food court, while the outparcels offer more conventional sit-down chains. The idea of bringing a bunch of restaurants together for a special deal seems inconceivable. But the Promenade Shops, to keep their vacancy rate down—and I’d estimate it’s stuck at close to 20% right now—are clearly willing to lure the types of commercial uses that remain viable, while the lifestyle center concept as a whole shifts its focus away from shopping and more toward leisure and recreational spending. My suspicion is that lifestyle centers may be better aesthetically equipped than conventional enclosed malls for this consumer adaptation, thanks to their faux main street vernacular.

But they have to work overtime. The Promenade Shops at Saucon Valley is reasonably well designed, but the overall site selection is odd. Almost everyone I know who has visited remarks that it’s “in the middle of nowhere”. While incomes in the immediate area are quite high, it’s so sparsely populated that it defies the premise of “retail follows rooftops”. Income density is low. This lifestyle center is not visible from a major highway, despite the proximity of I-78. And the back of the lifestyle center is South Mountain, so there’s no chance of subsequent development improving the visibility from another angle.The entire premises only achieve visibility from motorists driving by on the south, and Center Valley Parkway isn’t a major arterial. This might explain why a particularly troubled storefront space, near the butt-end of everything, can’t secure a more lucrative tenant than a Subway.And it’s not just any Subway—it’s a big one.It’s common for Subway locations to seat no more than 20 people. This location looks like it has space for twice as many. Why so big? Subway franchises typically seek low-cost leasable space…which very well may be the case here.

Aside from morphing this lifestyle center into a dining, drinking and entertainment establishment—which might keep it going for a decade—I’m not sure how the Promenade Shops at Saucon Valley will fend off the same decline that at least four other malls across the region have faced. Heck, the Promenade Shops aren’t even pedestrianized, unlike many lifestyle centers.  The murky future of these commercial campuses leads one to ask, “Are lifestyle centers really that special?” Are they sufficiently different from enclosed malls? Of course not: in fact, many of the earliest malls from the 1950 began as open-air districts that eventually became enclosed as people craved air condition in the hot summer months. Only in the 1990s did mall developers rediscover outdoor shopping, branding them as “lifestyle centers” no doubt with the intention of distinguishing them from malls…which the most prescient out there already predicted would fail.

I don’t think malls or lifestyle centers are going to face extinction. But I suspect they’ll have to fall a lot further before they enjoy any resurgence. Only when they become endangered—a novelty—will they perhaps trigger a nostalgia among elderly Gen Xers, who grew up on experiential shopping and may hope to recreate it. In the meantime, we at least get treated regularly to pictorial and video tours of our dead and dying retail palaces…all available on the Internet, the same digital infrastructure that has helped to undermine them in the first place.