Can New Jersey’s Dying Malls Be Saved?

It’s lunchtime on a Tuesday, and there are no shoppers in sight at the Phillipsburg Mall. Just outside the entrance, a guy is smoking weed. Inside, the loudest sound is the echo of my own footsteps. In the distance, I detect the hum of the mall’s HVAC system.

No one is manning the customer service desk on this afternoon. The ice cream shop is dark—though its blackboard still advertises a “buy one cone, get one free” special. I turn a corner and a few shoppers come into view. A woman with a shopping bag enters a Hallmark Store, and a half-dozen customers browse the aisles of Old Navy. But apart from the cashier, I appear to be the only one in Kohl’s, one of just two anchor stores left in the mall following the closing earlier this year of Sears and Bon-Ton, a department store chain that is liquidating its 256 stores.

I try the wing housing Gold’s Gym, where a few fitness buffs can be seen catching a lunchtime workout. Nearby, nearly all the shops are shuttered. In fact, vacant shops seem to predominate throughout the 29-year-old mall, some behind metal gates, others still illuminated but eerily empty of merchandise.

The Phillipsburg Mall, in western Warren County, not far from where Route 78 crosses the Delaware River, is an extreme example, but throughout New Jersey, many malls are feeling a similar pain.

Online shopping and changing demographics have caused a seismic shift in traditional retailing that has left malls reeling. In some communities, malls are seeking to reinvent themselves as multidimensional destinations, with an increased emphasis on entertainment options and, in some cases, office space and residential units. For almost all malls, creating experiences has become as important as—or even more important than—shopping itself.

Where Malls Are Headed
If you’re a Baby Boomer or a Gen Xer who came of age in the Garden State, a mall likely looms large in your memories. The mall was a place to hang out, to meet up with friends, to catch a bite at the food court, and to try on (and maybe even buy) the latest fashions. In winter, it was a little bit of summer even when snow whirled outside; in summer, it was cool and comfortable no matter how high the mercury rose. And when you grew up and had kids of your own, it was the place to go when you needed onesies, toddler fashions, and a place to escape the four walls of home. There was nothing else like it.

But times change. Today, there are some 1,200 enclosed malls across the United States, but that number is expected to shift dramatically downward. Last year, a report from the financial services company Credit Suisse predicted that up to a quarter of America’s malls could close within the next five years. Clearly, New Jersey is not immune. As of this writing, the state is down to 28 so-called enclosed regional malls (malls that draw shoppers from an entire region), following the closing earlier this year of the Burlington Center Mall in Burlington County.

In recent decades, New Jersey has lost the Flemington Mall and the Ledgewood Mall in Roxbury, both replaced by open-air shopping centers, and Seaview Square Mall in Ocean Township. Other malls remain in peril, and meet the definition of a “dead mall”—that is, one that is largely vacant and/or has lost its anchor tenants. Phillipsburg is arguably among those (management would not reveal its vacancy rate), as is Voorhees Town Center, which is suffering a 50 percent vacancy rate.

To be sure, a few malls in the state continue to thrive, notably the Mall at Short Hills, which is considered one of the most successful in the country, with sales per square foot a brisk $1,245 (SPSF is calculated as total revenue divided by total retail square footage). Westfield Garden State Plaza, with SPSF at $892, is similarly healthy. Still, they pale in comparison with the Mall at Rockingham Park in Salem, New Hampshire, perhaps the country’s most lucrative enclosed mall, with SPSF reported at $2,105.

Affluent communities with lots of buying power surround the Mall at Short Hills and Westfield Garden State Plaza, and both succeed in large part by catering to high-income shoppers in A-list stores like Gucci and Louis Vuitton. Unfortunately, not every mall is as well positioned. Voorhees Town Center, when it was sold in 2015, was earning a mere $241 SPSF.

Apocalypse Now?
It’s widely believed that online shopping poses the greatest threat to New Jersey’s malls. Retail forecaster Forrester predicts that Web sales will constitute 11 percent of total U.S. retail this year, up from 8 percent in 2013. That doesn’t seem like a huge chunk, so why the dire predictions for malls?

James W. Hughes, dean emeritus of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University and coauthor of New Jersey’s Postsuburban Economy, traces part of the problem to the transformation of department stores, which have long served malls as anchors—large stores expected to draw lots of shoppers. “Fifty years ago they were multifunctional,” Hughes says of department stores. “They sold household goods, furniture, apparel. Over time, though, they narrowed themselves to mostly apparel—and apparel is the largest online sector in absolute terms.”

In fact, according to a U.S. Census report, apparel represents 18 percent of the online market, followed by furniture and home furnishings at 10 percent.

Consider the large number of apparel retailers at almost any mall, and you start to understand the emergence of the term “retail apocalypse.” The coinage is used to describe the recent wave of retail bankruptcies (Bon-Ton, the Limited, Wet Seal) and store closings (Bebe, Michael Kors, J.C. Penney, Sears, Macy’s). The same Credit Suisse report that predicted all those mall closings also reported that a record 8,640 retailers would close up shop in 2017—40 percent more than in 2008, the first year of the Great Recession.

In addition to online competition, many stores are victims of what’s called over-retailing. This trend is seen in the emergence, a decade or so ago, of power centers. These convenient, open-air shopping centers—anchored by a big-box retailer like Target and incorporating a number of other large chain retailers—have become a significant shopping option. Often they mean not having to schlep to the mall for a pair of sneakers.

The retailing industry, says Hughes, “is cannibalistic. What we saw during the boom years was developers saying, ‘Okay, we know there’s not enough growth to support a new facility, but we’re going to build it anyway, because we’ll take this and that away from existing players.”

Photos by Ira L. Black

An additional threat to retail is financial. “Some retailers,” says Thomas Onder, a retail development attorney in Lawrenceville, “have just become too debt heavy.” In fact, many of the retailers that filed for Chapter 11 bankruptcy protection in the past two years—including mall standbys like Gymboree and True Religion—had previously been bought by private-equity firms that forced them to assume large amounts of debt. Other familiar brands, among them J.Crew and Claire’s, are reported to be working hard to manage potentially crippling debt loads.

Malls came of age with the Baby Boomers and their parents who, in the decades following World War II, fled the city and settled in the burgeoning suburbs. New Jersey’s first shopping mall was Garden State Plaza, which opened in three stages between 1957 and 1960, but wasn’t fully enclosed until 1983. The Cherry Hill Mall, which opened in 1961, was the first truly enclosed mall in New Jersey—and on the East Coast.

The malls lured shoppers from homes and drew vitality—and cash—away from town centers, often leaving local main streets with a shabby, desperate look. It worked until the millennials—the generation that came of age in the early years of the 21st century—decided they’d rather live in urban environments like Hoboken, Jersey City and Philadelphia, which offered easy access to all of the things they craved: bars, cafés, ethnic eateries, music clubs and the like. Malls began to lose not just a significant customer base, but also, in the words of Hughes, “their magic.”