Macerich exec says “the retail apocalypse is a good thing”

Jesse Franklin said the current headwinds facing the retail industry are spurring tech-innovation and giving rise to better tenants

May.May 21, 2019 12:13 PM
Macerich shopping malls and Macerich's Jesse Franklin (Credit: Macerich and CREtech)

Macerich shopping malls and Macerich’s Jesse Franklin (Credit: Macerich and CREtech)

As e-commerce continues to kill brick-and-mortar stores, some landlords appear to be embracing the new reality for retail.

“The retail apocalypse is a good thing,” said Jesse Franklin, the vice president of investment and innovation at retail giant Macerich, during a panel Monday at the International Council of Shopping Centers convention in Las Vegas.

“It’s calling out all of those retailers that haven’t invested in their brand, that aren’t connecting with their customers, and it’s going to allow us to bring in a new set of retailers that are actually much more connected to customers, and allow our centers to thrive.”

At the panel, which focused on innovative products and opportunities landlords are seeking as the retail markets decline, Franklin was joined by JLL Spark’s head of growth Andrea Jang, Fifth Wall Ventures’ co-head of retail investments Dan Wenhold, and Zach Aarons, the co-founder of tech-accelerator Metaprop.

Franklin pointed to the trend of customers who have drifted from brick-and-mortar stores that sell products and instead turned to online sellers.

“If we had a diaper store, then that diaper store is going to die,” he said.

Instead, he highlighted the role Amazon has played in propelling digitally native and consumer-savvy companies to brick-and-mortar storefronts — something that Macerich has tried to do at its own properties.

“Amazon itself has opened a door to a variety of digital brands that are all now looking to go omni channel,” he said. “And as they start opening doors, you see the center start to come to life.”

Panelists echoed the optimism expressed by Franklin, and said that the rate of change being experienced by the retail industry was driving the demand for new innovation products. JLL Spark’s Jang noted that just 10 percent of retail is conducted online, and that Amazon makes up only 4 percent of that volume.

Metaprop’s Aarons, whose firm has invested in over a dozen real estate tech startups, offered one solution to push back against the retail industry headwinds.

“The solution to the retail apocalypse is just block-chaining all the malls in America, right?” said Metaprop’s Aarons, before qualifying, “I’m just kidding.”

Macerich, which is the third largest shopping mall owner in the United States with 65 million square feet across 63 malls, has in the past year sought alternatives for its retail spaces by partnering with co-working firms to fill some of its retail space. The company announced a partnership with flexible-office-space provider Industrious in August last year, and launched its first location in Arizona.

Despite those efforts to activate its vacant spaces, Macerich has been forced to offset significant declines in revenue. The company’s net income in the last quarter of 2018 was down 64 percent, to $11.7 million, compared to $32.7 million the year before. In the first quarter of 2019, its revenues totaled $7.8 million — an improvement from a year earlier but down from the previous quarter.

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