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The Real Deal Los Angeles

Mall landlords are welcoming online retailers and startups

The move is a push to lure millennials to shop brick-and-mortar style
November 15, 2017 10:00AM

Westfield Century City (Credit: Westfield Group)

As the retail market undergoes a major shift and consumer preferences change, mall landlords are increasingly finding themselves renting their properties to an unlikely new tenant: startups and lesser-known brands.

The new wave of stores, which often have a big millennial following, usually serve as showrooms and don’t require as much square footage as major department stores have in the past, the Wall Street Journal reported. Customers can continue shopping online and have their purchases delivered to the location, which ultimately helps bring in foot traffic to the mall.

Westfield Century City is a prime example. The recently renovated mall is now host to online retailers such as fashion brand Bonobo, candy boutique Sugarfina, eyeglass retailer Warby Parker and even Amazon Books. Low-calorie ice cream company Halo Top will also be extending its grocery aisle presence and launching its first physical store in the mall soon.

But while these new options may lure savvy online shoppers, it poses a risk for landlords. Taking a chance on a startup can lead to vacant space if the startup fails – as evidenced by Nasty Gal Inc.’s quick rise to prominence and later demise when it opened a physical store – and leaves your space vacant.

The volume of physical stores occupied by retailers that started online stood at 140,209 square feet this year through the end of October, up from 15,435 square feet in 2012, according to real-estate data company CoStar Group. Despite growth, the number represents just under .05 percent of the occupied rentable building area in the malls. [WSJ] Natalie Hoberman