Commercial Real Estate

CRE Opinion: Retailtainment To the Rescue

As big box retail spaces are left empty, owners and developers are turning to entertainment companies to backfill the vacancies.

Ryan Johnson of SRS Real Estate Partners

This year, almost 36 million square feet of vacant space is expected to be returned to the market—most in the apparel and electronics industry due to the highly commoditized nature and competitive landscape of those retail categories. Sears and Macy’s alone will return approximately 18 million square feet of mall space over the next year, while JCPenney announced in February that it would be closing between 130-140 stores.

The sudden influx of big box vacancies has many owners scrambling to identify users who will occupy large spaces at a time when few traditional big box retailers are continuing to expand. With this disparity, mall owners and developers are being forced to get creative when identifying tenants to backfill large vacancies.

Entertainment concepts are an ideal replacement for department store boxes because they require a hefty retail footprint and large accessible parking fields, while owners and landlords appreciate the traffic and synergy these “internet resistant” uses can bring to a center.

Historically, movie theaters have been the biggest player in the entertainment category; however, they are considerably outweighed by new concepts competing for consumers’ entertainment dollars. Some active groups we’ve seen this year include Main Event, Pinstack, Pinstripes, Punch Bowl Social, LEGOLAND, THRILLOCITY, trampoline parks like Jump!Zone and Air Riderz, axe throwing concepts, “guntry” clubs or luxury shooting clubs, and gymnastics concepts like The Little Gym & iFly.

Unfortunately, not all concepts to enter the market will be successful. Consumers are selective with their entertainment dollars and if an operation doesn’t offer an experience that is fun, immersive, interactive, safe, and affordable, it’s uncertain if people will return.

The movie industry experienced a dip in attendance several years ago with the advancements in home theater technology. To draw consumers back into the theater, many had to adapt by offering full food and beverage service in order to create a unique, elevated movie-going experience. While Studio Movie Grill and Alamo Drafthouse were some of the first movie concepts to offer a full-service experience, longtime players like AMC and Cinemark have developed their own versions of the movie theater eatery to remain competitive and relevant.

Other established entertainment players like Dave & Buster’s and Chuck E. Cheese’s have also adapted in a competitive environment by employing cutting edge technology in their games, promoting a family-oriented atmosphere, and creating cool, inviting venues for recurring events like birthday parties, field trips and corporate team building outings.

In Dallas/Fort Worth, new tenants include KidZania, an 80,000-square-foot experimental learning, indoor theme park for children that will debut at Stonebriar Centre Mall in Frisco, and Crayola Experience, a 60,000-square-foot indoor amusement center planned six miles away at The Shops at Willowbend in Plano.

Unfortunately for some shopping center owners, it may prove difficult to attract an entertainment user in smaller, more rural markets where many department store closures have occurred because traditionally, we’ve seen these tenants targeting markets with strong population densities, good daytime population, and high median household incomes. Nevertheless, as the industry continues to have large retail closures, it will be interesting to see which entertainment concepts will successfully repurpose big box spaces across the country as well as locally.

Ryan Johnson is senior vice president and co-market leader at SRS Real Estate Partners

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