Mall Operators Looking To Small, Local Businesses To Bring Unique Flair To Their Shopping Centers

Retail property owners have adapted to major changes in the last decade or so, incorporating new technologies, e-commerce and more. But as the market shifts keep on coming, retail owners are increasingly looking to the original retail tenant type to fill their spaces and create unique experiences. 

To diversify their tenant bases and keep customers interested, landlords are taking chances on locally based tenants and are shifting their role to a more collaborative one in many cases, retail experts told attendees at Bisnow's Los Angeles State of the Market event Tuesday at the Omni Los Angeles Hotel at California Plaza. 

"None of us want our places to look like Anywhere, USA," said Wilson Meany's Will Heidel, who focuses on development and leasing.

The key to differentiating your shopping center is finding retail tenants that can innovate, he said.

Merchandising mix is key to helping a center stand out, Pacific Retail Capital Partners Chief Operating Officer Donna Blair said. Blair also said sometimes the process of finding retailers that resonate can look a bit like trial and error, but she said that an emerging type of tenant her firm looks at isn't a big-name, national tenant.

"Small businesses and local businesses are an ever more important part of what we do in our centers," Blair said. "There's not enough national tenants — certainly not in B and C malls and even in A malls — to be able to go around and fill this space."

It's more challenging to find these tenants and specifically to find the ones that are the best fit for your shopping center, Blair said. 

"It's harder work, for sure, but it makes a much more interesting and dynamic place," Blair said.

At Westfield Century City, mall ownership has an incubator specifically designated for up-and-coming businesses that might not otherwise have a chance to get into a busy mall like that one. Similarly, the mall has a short-term program for retailers that lets them have a cart in the mall to get started. 

"The team physically is out searching for people that have never done a deal and never been in the retail platform to get these guys started," Unibail-Rodamco-Westfield Senior Vice President of Development Kim Brewer said. "Because everyone started someplace, right?" 

"Our jobs as owners and landlords have changed," Blair said.

More investments are made in these tenants, and often they need more guidance and help in general, whether that is with finding an architect or navigating the permitting process. 

"There is much more of a partnership, not just in identifying those local players but actually getting them open and operating and being successful," Blair said. 

But as Allen Matkins partner and panel moderator Elizabeth Wilgenburg said, many of these smaller tenants don't have the budgets that larger, national tenants usually have.

Blair said it is increasingly challenging to fund large tenant improvement allowances, and while landlords have different approaches for different tenants, one thing they are doing is offering more free rent. 

Brewer said URW is becoming a partner with tenants. At the company's Westfield Topanga mall, it entered 50-50 partnerships with tenants in a food hall called Topanga Social. 

Cities are also leaning toward small businesses, especially after the onset of the pandemic, which hit small businesses much harder than larger, national operators. 

Small businesses drive the local feel that residents want, Beverly Hills Mayor Julian Gold said. Gold said small businesses are starting to come back to Beverly Hills, a success he chalked up in part to the city's active chamber of commerce.

In Burbank, the city government has taken steps to boost small businesses and give benefits to small-business owners, Burbank Mayor Konstantine Anthony said. The city started a street fair that brings really small businesses to downtown Burbank, allowing them to set up pop-ups for a small fee and sell their wares. On-street dining instituted temporarily early in the pandemic has been allowed to continue. All of these interventions and others like them aimed at helping smaller retailers and businesses have helped the city's economy, Anthony said. 

"I do believe, absolutely, that small businesses drive the local economy, and when you diversify your small businesses, you create a bulwark against large national and international changes," Anthony said.