It's Curtains For Some Theaters Across The U.S., But Developers Are Planning Sequels

Theaters have struggled in the two-plus years since the pandemic confined even the most devoted cinephiles to their couches, and although summer blockbusters boosted traffic this year, financial troubles have shuttered theaters across the country, leaving huge, specialized empty spaces in their stead.

Long seen as a potential saving grace for battered retail centers, movie theaters have been well-trafficked destinations that could draw crowds to nearby stores and restaurants, but as major theater chains struggle, these big boxes could instead become redevelopment targets.

"Frequently other companies come in and refurbish and reopen closed locations," National Association of Theater Owners Chief Communications Officer Patrick Corcoran told Bisnow. "That's been happening throughout the pandemic and we expect it to continue."

Some reopen as fancier theaters with better amenities and newer technology, but others are turned into something else or razed entirely.

For example, Decurion Corp., parent of movie theater chains Pacific Theatres and Arclight Cinemas, closed all of its locations in 2021 in the aftermath of the pandemic. But toward the end of that year, the company filed a permit application with the city of Los Angeles to develop a 273K SF industrial campus on the site of one of its dark theaters in the Chatsworth neighborhood.

And earlier this year, the city council in Maple Grove, Minnesota, approved a plan for Atlanta-based Floor & Decor to gut the interior of the former AMC Arbor Lakes 16 and convert it into its flagship store for the state. 

“This is a good reuse of this building," developer Launch Properties principal Dan Regan told CCX Media. "As everyone knows, the large anchor box universe of prospective tenants and occupants for buildings of this size are becoming fewer and fewer and fewer with every passing day."

In other areas, closed theaters are seen as an opportunity to put a dent in the growing need for multifamily space, adding apartment complexes or mixed-use developments in place of the big screens.

However, there can be complications with this approach, especially when the theater in question is a smaller niche location with a local following.

For instance, in Royal Oak, Michigan, the Main Art Theatre, a victim of pandemic closures, was razed this summer to make way for new development, over the objections of the nonprofit Friends of the Main Art Theatre, whose attempts to preserve the theater lost out to the owner’s desire to develop it.

The development, which will include retail, restaurant and office space, will also refurbish and retain the 80-year-old theater's marquee.

In Berkeley, California, San Francisco-based Panoramic Interests has filed plans to replace the downtown Regal UA Theatre with a 17-story building, the San Francisco Business Times reports. But because of the historic nature of the art deco theater, which opened in 1932, the plans call for leaving its historic facade intact and building behind it. Berkeley hasn't approved the project yet.

While the wheels turn on redevelopment plans for the theaters that have already closed, new closures keep coming. Following the Chapter 11 bankruptcy filing of its parent company, Cineworld, Regal Cinemas will close three Southern California theaters as part of a restructuring plan.

The bankruptcy will include what Cineworld, which has the second-most theaters in the U.S. at more than 500, called a "real estate optimization strategy," including "collaborative discussions" with its American landlords for better lease terms, Cineworld said. 

The company plans to close at least 20 of its locations, perhaps more, according to its bankruptcy filings, which also note the company is burdened by more than $5B in debt.

A wider contraction of the number of U.S. screens is possible. Moffet Nathanson analysts contended in a note to clients the industry is in "dire need" of trimming the number of screens, as reported by Business Insider.

"We expect to see a drop in U.S. screens as the business looks to normalize," the note said. There are about 40,700 screens nationwide, not so different in number from 2019.

Meanwhile, AMC Theatres, the country's largest operator of movie theaters, is pushing in the opposite direction from Regal Cinema: expansion, even though the company is still running at a loss. In the spring, AMC added seven movie theater properties acquired from Bow Tie Cinemas, a family-owned national theater chain with locations mostly in the Northeast.

During the second quarter of 2022, AMC lost $121.6M, which represented an improvement compared to a net loss of $344M during the second quarter of 2021. “As we have publicly disclosed previously, the film slate in the third quarter of 2022 is expected to be relatively weak," AMC Chairman and CEO Adam Aron said in a statement.

"However, we continue to be quite optimistic about the increasing demand for our portfolio of movie theaters in the fourth quarter of 2022 and calendar year 2023,” Aron said.

Aron and other movie executives are counting on a raft of new movies due out in the latter part of 2022 to boost box office sales, and thereby, their own revenue.

So far this year, U.S. movie ticket sales totaled nearly $5.5B, according to The Numbers, which tracks box office sales.

That is an improvement on 2021, when about $2.3B had been sold by the end of summer, but compared with 2019, the recovery pales. By the end of the pre-pandemic summer of 2019, nearly $8B in tickets were sold.

Smaller chains face a less certain future as well, though most have emerged from the pandemic. 

Studio Movie Grill and Alamo Drafthouse Cinema both filed for Chapter 11 bankruptcy (in late 2020 and early 2021, respectively), emerging later in 2021 with new funding. Both chains closed a number of underperforming locations, but also have plans for opening new locations.

Alamo Drafthouse has seen mixed results this year, following a pattern that suggests that foot traffic at movie theaters is more closely tied to the release of blockbusters than before. The chain's most successful period in terms of foot traffic so far this year were May and June, owing to the release of Doctor Strange in the Multiverse of Madness and Top Gun: Maverick, MSN reports.

Independent theaters, which always represented a niche interest among moviegoers, had a tough pandemic as well, though many survived, partly as beneficiaries of the Shuttered Venue Operators Grant program, which gave out about $11.3B to operators of movie theaters, as well as live theaters, museums and talent reps, most of whom were small businesses.

"Community arthouses are in a better position now to move forward with the times," Ryan Oestreich, the general manager of Music Box Theatre in Chicago, told Business Insider. "We'll be nimble and figure out what works for our audience."