March 29, 2023

Some CT malls going through resurgence, others face uncertain future

3 min read

As Danbury Fair enjoys a resurgence after a stretch of stubborn vacancies, other Connecticut malls face an uncertain 2022 holiday season as inflation cuts into the spending muscle shoppers had flexed after the initial stretch of the COVID-19 pandemic — but with the itch to get out of the house still powerful for many.

The question becomes whether those successes will translate into additional investments, which are already underway at some malls like new apartments going vertica l at the Main Street entrance to Westfair Trumbull; or the food hall proposed by celebrity chef Todd English for Stamford Town Center, where a Brazilian steakhouse opened last month.

Despite struggles for some including the Crystal Mall in Waterford, large mall operators are expressing the greatest confidence in years as leasing activity continues, despite ongoing competition from online vendors like Amazon and Walmart, and retail districts which are seeing a renewal for both stores and restaurants.

“The delays in shipping, which were abundant last year, I think really frustrated a lot of people — the shipping costs are getting expensive,” said Doug Healey, senior vice president of leasing for Danbury Fair owner Macerich, speaking Thursday afternoon on a conference call with investment analysts. “I think bricks-and-mortar is going to be very, very favorable this holiday.”

That is a reversal from retail sentiment prior to the COVID-19 pandemic, as Amazon’s inexorable march sent a number of retailers into bankruptcy proceedings or outright liquidations. Macerich’s chief financial officer said Thursday he sees no evidence of that happening after this year’s holidays, saying today’s retailers have far stronger cash reserves and that foot traffic remains strong.

“Ordinarily right now we’d start to hear from retailers that were setting themselves up for … a major restructure,” said Macerich CFO Scott Kingsmore. “That’s really just not the case, so I think 2023 will likely be an unusually low year — I don’t think it’s going to be a ‘nil’ year, but I do think it’s going to be a low year in terms of tenant fallout.”

Connecticut became a national litmus test for mall appeal in 2019, after Brookfield Properties opened the SoNo Collection in South Norwalk less than a month in advance of the mammoth American Dream mall along Interstate 95 in East Rutherford, N.J. While the SoNo Collection has been able to keep most of its storefronts full, Brookfield Properties has yet to fill out a restaurant row planned for West Avenue at the main entrance to the mall, despite the presence of Yard House there and the mall having attracted a number of eateries to upper-level restaurant spaces.

Last week, CoStar reported the transfer of the Crystal Mall in Waterford to lenders, after prior owner Simon Property Group elected to make no further payments against an $81 million loan secured by the mall. Hearst Corp. subsidiary Fitch Ratings listed the mall’s occupancy at about 40 percent as of July, factoring in the closure of a Bed Bath & Beyond store there.

Simon Property Group did not respond to a query on its decision to transfer the Crystal Mall to Rialto Capital, which specializes in maximizing returns for investors holding loans that have soured.

Speaking this week on a conference call, CEO David Simon said that after years of building up their online sales, retailers are reinvigorating their stores to draw new shoppers.

“The returns on ecommerce just aren’t quite what everybody talks about,” Simon said. “Bricks is where the action is.”

But mall operators remain emboldened by fresh concept stores and renewed interest by existing retailers, with Macerich’s Kingsmore highlighting Danbury Fair’s lease with Target on Thursday. He added Macerich is seeing unprecedented conversions of traditional store floors to other uses, including entertainment like the Round1 bowling and amusement center planned for Danbury Fair, not far from the new Golf Lounge 18 there.

“As we all know, Target picks and chooses its real estate extremely carefully,” Kingsmore said. “The decision to locate at Danbury Fair is an enormous testament to the real estate and the center’s performance and reputation.”