Tough times in retail? Not at Palm Beach Outlets, off-price malls

Online shopping and changing consumer tastes have roiled the retail landscape, but Palm Beach Outlets seems to be weathering the storm just fine.

Reflecting the success of off-price shopping centers in general, Palm Beach Outlets boasts full parking lots, ringing cash registers and a near lack of empty space.

“We are still thriving,” said Pam Rada, marketing director at Palm Beach Outlets. “People are looking for discounts.”

Competitive pressures are forcing many merchants to shrink their once-massive footprints and many malls to rethink their strategies. Macy’s is closing locations, including its store at CityPlace in West Palm Beach. Sears, J.C. Penney and Gander Mountain also are shuttering locations across the country.

Yet off-price shopping centers have performed well, a trend that illustrates the ever-shifting reality of retailing, said John Crossman, president of Crossman & Co., an Orlando-based real estate brokerage specializing in retail properties.

“Malls are going to change substantially,” Crossman said. “There always is loss, but then there tend to be gains somewhere else.”

In the post-Amazon era, the loss is felt most acutely at traditional malls, while the gains accrue at outlet centers, which tout bargain prices and constant sales.

As traditional malls struggle to maintain traffic and tenants, Palm Beach Outlets seems to be thriving. The shopping center draws steady crowds and a roster of tenants such as Saks Off Fifth, Nordstrom Rack, Ross Dress for Less, Forever 21, Nike, Puma, Reebok, Brooks Brothers, Whole Foods Market and Starbucks.

Two small storefronts are empty, but the only significant vacancy at the property is the former Sports Authority, which closed in 2016 — and even that wasn’t as much of a blow as it might have been. At 35,000 square feet, the Sports Authority at Palm Beach Outlets was the chain’s smallest store in Palm Beach County, and the space was taken briefly by a Halloween store and then a Christmas-themed retailer.

Rada said the mall is negotiating with retailers interested in the Sports Authority box and the two smaller locations.

Stephanie Martinez of Port St. Lucie visited Palm Beach Outlets one day last week and shopped at The Gap store, where she stocked up on clothes for her 2-year-old son. She lives a bit closer to the outlet mall in Vero Beach, but Martinez said Palm Beach Outlets offers a better variety of stores and deeper discounts.

“I want to get a discount when I go to an outlet mall, and I feel like they actually discount prices,” Martinez said between stops at The Gap and Under Armour.

The Palm Beach Outlets’ success is especially striking considering that it rose on the site of a failed mall. Palm Beach Mall opened in the early 1970s as the first enclosed shopping mall in Palm Beach County. By 2009, it was mostly empty and in foreclosure.

Palm Beach Outlets, built and leased by New England Development of Boston, marked a chance to start over. The old Palm Beach Mall was anchored by Macy’s, Sears, Dillards and J.C. Penney, traditional department stores that have fallen on hard times. The new tenant roster (aside from Sports Authority) is mostly free of risky tenants.

In the traditional mall model, a few anchors occupy huge amounts of space, a reality that can create tensions with landlords and smaller retailers.

That reality is underscored at The Gardens Mall in Palm Beach Gardens, where anchors Sears, Macy’s and Nordstorm are battling with the mall’s owner and city officials for the right to sublease space. The spat started when Sears sought to sublease its second story to Dick’s Sporting Goods.

Palm Beach Outlets follows the off-price landlord’s playbook of not granting too much sway to any single merchant.

“It’s less traditional big boxes, and there’s more diversity of tenants in there,” Crossman said. “It makes for less risk.”

The success of the Palm Beach Outlets turnaround was underscored in 2015, when a 460,000-square-foot chunk of the outlet mall sold for $278 million, the second-largest property sale in the history of Palm Beach County. Later that year, the 300,000-square foot strip center along Interstate 95 fetched $117 million.

While overall vacancy trends for outlet malls are hard to come by, off-price landlord Tanger Factory Outlet Centers Inc. says its 36 outlet centers were 98 percent full as of the end of 2016.

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