The Retail Implosion Nibbling at 12 Oaks Mall

[401don]

If the tastes for the enclosed shopping mall go away - plenty of evidence suggests that to be a national trend - then it is over since it is a model built on people going out of their way to get to it.

It seems the whole rideshare/driverless car direction conflicts with the decline of the destination mall. The plazas and big box stores are for running in and out with your car while the rideshare would drop you off and pick you up from the mall a couple of hours later. Of course the alternative to both is to shop at home on your computer.

[iheartthed]

It seems the whole rideshare/driverless car direction conflicts with the decline of the destination mall. The plazas and big box stores are for running in and out with your car while the rideshare would drop you off and pick you up from the mall a couple of hours later. Of course the alternative to both is to shop at home on your computer.

Do people really hail Uber/Lyft to go to malls? I don't think Uber/Lyft apps have much of an effect, tbh. Taxis have existed longer than malls, and Uber/Lyft is just a taxi service. If malls would flourish because of the ability to hail a ride then malls would be inundated with taxis. I rarely see meaningful amounts of taxis at any mall.

[Hypestyles]

https://www.eloquii.com/stores/detroit-mi.html

new clothing store aimed at plus sized women- opening now at 12 Oaks Mall-- heard a brief profile of them on wwj today.

[Lowell]

Front Page article on the Mall Implosion.

"...some analysts have predicted that up to 25 percent of malls nationwide could close by 2022."

The article then goes on to site the core of the implosion...

"Numerous malls have lost one or more department store anchors that they haven't replaced, including Eastland Center in Harper Woods, Westland Shopping Center, Laurel Park Place in Livonia, Lakeside Mall in Sterling Heights and Fairlane Town Center in Dearborn.
https://www.freep.com/story/money/20...ls/1419217002/
That list could grow if Sears, still an anchor at several area malls, closes more Michigan stores."

[Meddle]

I don't expect any Sears or KMart stores to last another 5 years.

[mtburb]

I even read in some places that a recession may begin as soon as...yep, 2020. By that point, don't be surprised to see even sit-down restaurants and movie theaters close in huge numbers too.

[313WX]

I even read in some places that a recession may begin as soon as...yep, 2020. By that point, don't be surprised to see even sit-down restaurants and movie theaters close in huge numbers too.

It's already happening with restaurants.

Ruby Tuesday and Logan's, in partcular, are two prominent chains that have continue to steadily hermorrhage locatiom despite the "great" economy.

[mtburb]

I also read on a Facebook forum that Long John Silver's just closed their Lincoln Park location. It was seemingly closed today since posts mentioned people going there "yesterday/last night/Sunday".

[Meddle]

I also read on a Facebook forum

Never do that. Ever. For any reason.


TGIFridays has also been closing sites. But the next great recession has been looming [[any day now ... ) since the last one in '08 or whenever it was.

[stasu1213]

Since retail use being discussed I would love to see a Columbia Sportswear open in downtown Detroit

[Detroitdave]

I used to live in LA also and remember Century City's mall going through a major rehab.
The thing about the LA area is there is wayyyyyyy to many shopping areas.
When I first lived there the beverly center was the new hot thing, then Melrose got really hot, then 3rd st in Santa Monica, then the BIG fish The Grove came and changed EVERYTHING. Then hollywood got their act together with Hollywood and Highland, and just recently the Beverly Center is just finishing up a MAJOR rehab.
The point is there is a LOT of competition in LA in a relative small area, so they have to always update their shopping areas.

I agree with this. The Westfield Mall here in the Century City neighborhood of LA is becoming more of food destination v shopping, slowly but steady. The mall isn't going anywhere anytime soon, its more about re-positioning it, and I'm sure the owners of it are doing quite well. 12 Oaks mall has demographics on it's side, and so I'm guessing they are or will follow a similar path with restaurants, shops and perhaps even residences

[EGrant]

Dining trends are changing and paying $15 for a mediocre meal at a chain restaurant with vinyl-lined booths ain't cutting it. Sorry, Logan's.

[Onthe405]

I don't expect any Sears or KMart stores to last another 5 years.

Meddle, that's an extremely optimistic time frame. Today SHLD closed at 0.76 a share. CEO Eddie Lampert's latest scheme to rescue the company doesn't have any suckers . .,er, "investors" willing to take on the bond debt.

Several analysts anticipate that Sears/Kmart won't even have enough cash to survive into the 2018 holiday season.

[mtburb]

Meanwhile, Sears/Kmart yet again has announced several more store closures. Fortunately for us at least, Michigan stores of both are spared.

https://www.usatoday.com/story/money...es/1510265002/

[PJSzerszen]

I've noticed a lot of vacancies too, some of which advertised new stores. That's inevitable in any mall. I saw one store that said it would open in Summer 2018. That was around Halloween. I saw a few former spaces cleverly converted into "Operations", whatever that is. It looked vacant to me.

Twelve Oaks Mall certainly isn't a typical case [[and in fact, I think could be said has exceeded Taubman's original expectations), but it's facing some major challenges:

-The mall opened in 1977. It's 41 years old. It was designed/built with the expectation to last 50 years. It will certainly exceed this, but there's no stopping the building from getting old. This evidence is really starting to show. Renovations in 1995 and 2007 have put new coverings on things, some systems have been replaced, the mall has generally been quite well-maintained, but it's aging. Being about 20 years ahead of its time in design has really bought it time.

-It's too big. The plan for a fifth anchor store [[result: Nordstrom) was original to the mall's design. The additional 90k s.f. of mall wasn't. It may have made sense at the time [[2006 planning), but things were changing fast. The recession accelerated that. There is absolutely no argument that Twelve Oaks [[and every mall) has been hemorrhaging tenants due to corporate changes. But having all of those extra spaces amplifies vacancies. That [[Nordstrom) wing itself may be sheltered by catering to a higher-end [[i.e., recession-resilient), but vacancies in the rest of the mall will mount. Which leads into the next two:

-Sears' days are obviously numbered as a retail store. Sears [[through its development arm) was one of the three partners that built Twelve Oaks [[the other being Hudson's and Taubman), so they've always been a big part of it. It's supposedly performing well itself, it's certainly the nicest Sears I've been in [[in a very long time), but the retailer is doomed. Sears owned its land and building. It was to put it up for auction earlier this year and lease it back but it canceled the auction. The status of the ownership is unclear. Taubman itself would be a natural contender to purchase it [[solely for the control once they vacate), but apparently Sears still owns it. I can't imagine any other tenant using the whole building. They may have decided to pledge it as collateral in bankruptcy financing. Presuming the best case scenario where Taubman acquires the Sears, what do they do with it? It's a "Class A" center, but I really don't think there will be many takers for a full 225k s.f. 1977 building with all original mechanicals. So Taubman doesn't get any takers and brings it down. What do you put in there? More in-line tenant space? You've already got too much. Another large-footprint tenant? Bloomingdales? Good luck. Restaurants and a junior tenant or two? Probably most likely. But that has many challenges with the grading of the site and the general saturation of restaurants in the area.

-Retail oversaturation in Novi. Build, build, build. How many times have West Oaks I & II, Fountain Walk, and Novi Town Center been demolished/reworked? It's way oversaturated. Much of Fountain Walk was never even occupied before being demolished. Novi Town Center which was originally a very nice, upper-scale regional outdoor center [[an early one) has become a strip mall. Those properties are still in good locations and may cut rent to attract tenants out of the mall. Easy access is king. Twelve Oaks can be a labyrinth.

-Recession. We're right on schedule to slip into a recession in the next year or two. It's a natural cycle, it's inevitable, and the signs are starting to appear.

-Aging of Novi. Novi is still a very nice community to live in. But it's aging and it's almost inevitable that with aging, quality will decrease. Infrastructure will age. Other regional malls have closed, driving criminals along with customers out to Novi.

-Other Anchors. It's within the realm of possibility [[unfortunately) that Twelve Oaks could very well lose another anchor beyond Sears in the next 10 years between closings, mergers, and consolidation. What do you do then?

-It's getting stale. It was "Minutes Away, Miles Ahead" in its grand opening literature in 1977. Renovations over the years have altered the mall and made additions [[of arguable quality and improvement). But the mall hasn't seen significant work since 2007. It still works, but 10 years is a generally stated lifespan for renovations for "Class A" malls. A lot has changed in 11+ years. They need to keep up on it and keep it fresh and they have failed to do that [[but probably feel they can get away with it due to lack of competition).

I grew up with Twelve Oaks being new and I have watched it age as I have aged myself. It's very unique and I'd love to see it outlive me. My father worked on the foundations in 1976. I have extensively studied its architects. It's going to face some major challenges in the coming years though.

I would predict Twelve Oaks, as we know it, won't exist in 2035. Taubman might decide to redevelop the property and/or build a new Twelve Oaks Mall after it gets too expensive to update/maintain or it may end up like Summit Place. I think the next recession will determine what path it takes. And for that, only time will tell.

One thing is for certain: Novi will be a VERY different place 15 years from now.

[Lowell]

Great analysis PJSzerszen.

[Bham1982]

Taubman would be happy if Sears closes, because they pay [[almost) no rent. The original anchors pay almost nothing and Sears doesn't drive any traffic. They won't have problems reconfiguring that space. Taubman just converted a Saks into an Indigo [[an expanding Canadian chain) in Short Hills, NJ, and they could do that here.

Novi is a young community that's getting richer, with all the new McMansions in the western part of the community, and the explosion of new homes in adjacent Lyon Twp. Their demographics are enviable and I would rest easy owning any retail property around Novi Rd.

[Towne Cluber]

Interesting first post and analysis. It is puzzling that you describe Novi as aging -- as if it were a community of [[soon-to-be) retirees. In fact, it is primarily filled with families of school-aged children as well as an increasing number of highly-skilled immigrant families. Furthermore, Novi is at the center of an area [[Northville, Canton, Plymouth, South Lyon, Brighton, Milford, Commerce, Hartland, Walled Lake) that has experienced the largest growth of population in the region and state. Twelve Oaks is the de facto regional mall for that area. So on the population point at least, your analysis is somewhat flawed.

[Scottathew]

2010 Census:

As of the census^[2] of 2010, there were 55,224 people, 22,258 households, and 14,599 families residing in the city. The population density was 1,825.0 inhabitants per square mile [[704.6/km²). There were 24,226 housing units at an average density of 800.6 per square mile [[309.1/km²). The racial makeup of the city was 73.0% White, 8.1% African American, 0.2% Native American, 15.9% Asian, 0.7% from other races, and 2.1% from two or more races. Hispanic or Latino people of any race were 3.0% of the population.
There were 22,258 households of which 35.2% had children under the age of 18 living with them, 54.1% were married couples living together, 8.6% had a female householder with no husband present, 2.9% had a male householder with no wife present, and 34.4% were non-families. 29.5% of all households were made up of individuals and 9.9% had someone living alone who was 65 years of age or older. The average household size was 2.46 and the average family size was 3.11.
The median age in the city was 39.1 years. 25.5% of residents were under the age of 18; 6.6% were between the ages of 18 and 24; 28% were from 25 to 44; 28.6% were from 45 to 64; and 11.3% were 65 years of age or older. The gender makeup of the city was 48.4% male and 51.6% female.

[PJSzerszen]

Well I suppose I could mean aging in two ways: the population and the city itself [[and the planning principles it was developed on). I'm certainly no expert on anything, but it seems to me like a lot of the new development in the immediate area has been geared toward "empty-nesters". There are quite a few new family homes going up in the Lyon area and Livingston County is recovering in that regard too. But the population of Michigan overall is dramatically aging. And if those models are correct, and when those folks pass on, there could be a very sharp population decline very quick.

But this is long-term stuff here. 15-30 years out.

I think the main reason Twelve Oaks has prospered so long is its location and the fact that it hasn't been "one-upped" by a new Class A center further north/west. But it probably won't be, simply because they just aren't being built anymore. If we went by 1990 demand/planning, the demographics today would probably support a Class A center near I-96 and US-23. So Twelve Oaks will do fine until its anchors shuffle, trends change further, and/or something replaces it. The location will always be its greatest asset, the land may have a higher use at some point in the future.

I certainly would think Taubman has plans in place and at the ready for whatever contingencies happen there, and I also suspect that they are also probably in the early stages of planning a comprehensive renovation once they know a little more about Sears. So I think TCO is well positioned to deal with whatever happens, but it's going to take a lot of money. Financing is getting more expensive and the projects getting riskier.

Let me be clear that while it certainly faces obstacles, it probably has among the greatest "Top 5" chances of any of the Detroit malls to survive another decade. Taubman took a lot of risks and built a lot of bad projects but Novi was very good to him. I bet, if anything, he ultimately wished he had spent a little less on Fairlane and a little more on Twelve Oaks.

Interesting first post and analysis. It is puzzling that you describe Novi as aging -- as if it were a community of [[soon-to-be) retirees. In fact, it is primarily filled with families of school-aged children as well as an increasing number of highly-skilled immigrant families. Furthermore, Novi is at the center of an area [[Northville, Canton, Plymouth, South Lyon, Brighton, Milford, Commerce, Hartland, Walled Lake) that has experienced the largest growth of population in the region and state. Twelve Oaks is the de facto regional mall for that area. So on the population point at least, your analysis is somewhat flawed.

[Bham1982]

Let me be clear that while it certainly faces obstacles, it probably has among the greatest "Top 5" chances of any of the Detroit malls to survive another decade.

IMO there are three enclosed malls that will survive the retail changes: Somerset, Great Lakes Crossing and Twelve Oaks. All three remain busy, with good demographics, location and an identifiable niche [[Somerset is upscale, Twelve Oaks upper middle, and Great Lakes outlet).

And two outdoor centers seem well positioned- Partridge Creek and the Rochester Village [[or whatever it's called). So I guess five "malls" will survive the shakeout. Also Briarwood, but AA, to me, isn't Metro Detroit.

[sirrealone]

I don't go to Twelve Oaks, but I'm curious, is it looking like it's out of date?

You made a few different references to how long it's been since it's been renovated, so I'm curious what the driver is to point out that this needs to be addressed.

We live nearest Somerset. I don't think the North side has been renovated since it was built in 1996 and the South side hasn't seen much since the second floor was added in the early 90's. That well exceeds your '10 year' cycle, but both sides still look relatively fresh. I think in the case of Somerset, they used materials, styling, and decor that wasn't tied to particular trends at the time, so it really doesn't look dated.

Now, from an individual store standpoint, I do agree with your timeline, and at least in Somerset it seems like many stores renovate on a fairly regular basis, so that the storefronts keep the mall looking fresh, and you don't get that worn down look from when stores go too long before remodeling that you see in many other malls [[e.g. Lakeside). So, at Twelve Oaks, I'm curious, are the common areas dated? Are stores keeping up with remodeling and such?

One last question, regarding the department stores at 12 Oaks, how do they hold up? Tying back to Somerset, I will point out that the department stores on the North side have not done any major renovations, and you can definitely see the age. Macy's is very tired looking these days.

[mtburb]

IMO there are three enclosed malls that will survive the retail changes: Somerset, Great Lakes Crossing and Twelve Oaks. All three remain busy, with good demographics, location and an identifiable niche [[Somerset is upscale, Twelve Oaks upper middle, and Great Lakes outlet).

And two outdoor centers seem well positioned- Partridge Creek and the Rochester Village [[or whatever it's called). So I guess five "malls" will survive the shakeout. Also Briarwood, but AA, to me, isn't Metro Detroit.

There's also Southland. It's the only closest enclosed mall for 80% of the Downriver populace, has just underwent a complete renovation in 2015 and most of their newer tenants are places other than stores [[multiple restaurants and the mall's first movie theater since the last one closed in 1999).

[PJSzerszen]

I wouldn't say it's too outdated, the design was very advanced yet conservative [[which has helped), it has performed much better in longevity than most other malls from the late-1970s. I think [[IMHO), the 2007 renovations took away from some of the clean and conservative language of the original design [[even with mid-90s renovation) and added a bit of "gaud" to it. That was popular in 2007 before the recession. The design trend now is moving back to being clean and minimalist.

For a good example of how I might be able to relate this is Great Lakes Crossing vs. Arizona Mills. For all intents in purposes, they are clones. They were both built at the same time, Taubman involvement, same architect, everything. Taubman sold its interest in AZ Mills to Simon who completed a substantial renovation, adding ceilings and really demonstrating the change in design trends since 20 years ago. There wasn't anything wrong with the mall as was, it's busier than GLC, but Simon was proactive and it has produced results.

Taubman seems proactive in the sense that they sell their interest before things get difficult, they have been proactive in keeping up with Twelve Oaks and I don't expect Taubman will ever willingly sell it. I do believe there's substantial debt against it, but within corporate reason. I would expect them to continue to be proactive.

So in that sense, while the mall doesn't look bad now, they need to keep it that way. And all of that metal halide lighting has to cost a fortune, building technology has come a long way. There are a lot of opportunities for modernization and efficiency improvements there that may not be visible to the average shopper.

Now, as for the service drive around the mall. Anyone count the vacancies there? Some for years and years?

I don't go to Twelve Oaks, but I'm curious, is it looking like it's out of date?

You made a few different references to how long it's been since it's been renovated, so I'm curious what the driver is to point out that this needs to be addressed.

We live nearest Somerset. I don't think the North side has been renovated since it was built in 1996 and the South side hasn't seen much since the second floor was added in the early 90's. That well exceeds your '10 year' cycle, but both sides still look relatively fresh. I think in the case of Somerset, they used materials, styling, and decor that wasn't tied to particular trends at the time, so it really doesn't look dated.

Now, from an individual store standpoint, I do agree with your timeline, and at least in Somerset it seems like many stores renovate on a fairly regular basis, so that the storefronts keep the mall looking fresh, and you don't get that worn down look from when stores go too long before remodeling that you see in many other malls [[e.g. Lakeside). So, at Twelve Oaks, I'm curious, are the common areas dated? Are stores keeping up with remodeling and such?

One last question, regarding the department stores at 12 Oaks, how do they hold up? Tying back to Somerset, I will point out that the department stores on the North side have not done any major renovations, and you can definitely see the age. Macy's is very tired looking these days.

[PJSzerszen]

Oh, as for the department stores:

Macy's got a comprehensive gut renovation in 2007 just as the Marshall-Field's transfer was taking place. It's considered a flagship store. But built to MF standards. It's probably larger than Macy's would have specified, but they are able to use it.

Nordstrom was obviously a new-build store in 2007 and is typical of their standards.

Lord & Taylor hasn't been significantly renovated since opening in 1978. The store seems to be doing well. They have done comprehensive renovations on other stores though. There have been rumors of them pulling out of Michigan for a long time.

JCPenney is typical of all of their stores. They are all very standardized. They have done a good job of keeping a 1978 store fresh.

Likewise, Sears is typical of their stores, perhaps above par. The store is dated, original to 1977. But what's there has been maintained above-par of Sears stores.