The planned arrival of a second non‑retail anchor at Hanes Mall has drawn both glass-half-empty and glass-half-full perspectives.

The optimistic side cites the relatively quick sales of the former Sears and Macy’s department store spaces to high-profile Winston-Salem businesses Novant Health Inc. and Truliant Federal Credit Union, respectively.

The pessimistic side cautions that the super-regional mall’s retail attractiveness has been diluted by the sale of the two anchor spaces. A potential closing of another anchor, a bankrupt J.C. Penney, could be the biggest blow, given the store’s central location in the mall.

CBL Properties, owner and operator of the non-anchor spaces at the mall, said Thursday that “we’re looking forward to working with the new owners on a successful redevelopment of the building.”

The groups have been mostly quiet since the COVID-19 pandemic began rocking the local and national retail marketplaces in mid-March.

“While the move by Truliant is certainly a good one for them, boutique retailers in Hanes Mall are likely disappointed the space is not going to be occupied by another retailer who could draw a broad number of different shoppers to the mall on a daily basis,” said Roger Beahm, the executive director of the Center for Retail Innovation at Wake Forest University School of Business.

“The presence of hundreds of new people working in what was once Macy’s can be a boost for mall business in the short run — as Truliant employees step into the mall for some of their specialty shopping needs, as well as immediately accessible food service,” Beahm said.

“It will also mean a further long-term loss in overall shopper traffic that could have been generated by a major retailer,” he said.

Victoria Lim, a market analyst at CoStar Group, a commercial real-estate research company headquartered in Washington, sees the securing of a health-care and a financial institution as anchors as a blessing for Hanes Mall.

“With brick-and-mortar retail facing a lot of challenges, we’re seeing more innovative projects like these pop up to backfill large blocks of retail space,” Lim said.

“This is especially the case in suburban areas, where creative office space is more difficult to come by than in more urban settings.

“The conversion of Sears and Macy’s to offices in Hanes Mall is just another example of adaptive reuse we’re already seeing in other markets across the country,” Lim said.

Eye to the long-term

Novant and Truliant bought the anchor spots — both across the street from their main campuses — with long-term growth in mind.

The real-estate arm of Novant purchased the Sears properties for $14.5 million in October 2018.

The purchase included the 175,000-square-foot store, the outparcel automotive store and the parking lots to the north and east of the mall stores — altogether 16.72 acres.

Since the purchase, Novant has been silent about its plans for the space except for placing signage at the indoor entrances. It declined to provide an update last week.

Truliant spent $8 million to buy the 154,000-square-foot Macy’s store on June 19, according to a Forsyth County Register of Deeds filing. The overall property consists of about 10 acres and 712 parking spaces.

“We chose to invest in this space as a way to more quickly and economically address our expansion needs,” said Todd Hall, Truliant’s president and chief executive.

Truliant estimates more than 550 employees could be based in the mall, compared with 425 employees on its headquarters campus.

The announcement came a little more than six months after Truliant won a controversial rezoning case that was part of its bid to expand on its Truliant Way headquarters property off Hanes Mall Boulevard. The goal was to build an additional office building and expand its existing building.

“The purchase gives us a centrally located new office close to our headquarters with easy access, ample parking and a ready and flexible infrastructure,” Hall said.

He said renovations of the Macy’s space are expected to begin in 2021, with employees moving in during 2022. He said it could take between eight and 10 years to reach the 550-employment target at the mall.

Converting the mall space from department store to financial services will require “a few deferred maintenance items that we will address as we begin to restructure the space,” Hall said.

“One use we are considering is relocating our member contact center to this new space,” he said. “However, nothing is finalized at this point.

Hall said the call center also handles customers’ digital fulfillment requests, “which is also on the rise, and we don’t expect volume in these areas to slow down. We have a number of growing departments at Truliant.”

Hall said that because of the extended time frame for occupying the former Macy’s space, “we may consider options that present themselves for leasing out a portion of the space for either retail or office purposes.”

‘A tremendous boost’

Local civic and elected officials breathed a sigh of relief after Truliant’s purchase announcement, given the potential challenges of CBL securing a replacement retail anchor.

Winston-Salem Mayor Allen Joines said he considers Truliant’s expansion plans as “a tremendous boost to our city.”

“It will help ensure the vitality of Hanes Mall and the areas surrounding it, while bringing more tech-enabled jobs to an attractive employer who’s been investing in our city’s future since 1952,” Joines said.

He said the purchase “is an impressive show of confidence in Winston-Salem by one of its most well-respected companies.”

“We thank them for all they’re doing to expand thoughtfully, and we’re honored they’ve chosen to reaffirm their commitment to our citizens with a project that benefits the city and local economy on so many levels,” Joines said.

Mark Owens, the president and chief executive of Greater Winston-Salem Inc., which promotes local economic development, said Truliant is “making another valuable investment in our city at an important time.”

“Truliant is a strong economic engine in our area, and this headquarters expansion means they will continue to be for years to come,” Owens said.

Hall said he envisions Truliant serving as a key mall anchor given “we see opportunities to maximize both interior and exterior areas to visually elevate the Truliant brand and promote advantages of credit union membership.”

“We also anticipate retail stores and dining areas within the mall will benefit from hundreds of Truliant employees having convenient access to shopping and other activities,” he said.

“There may also be mutually beneficial opportunities to partner with the mall on sponsorships or special events.”

Effect on leases?

Charles Gwinn, the manager of Hanes Mall, has said in previous interviews with the Winston-Salem Journal that the mall remains the mall of choice for not only Forsyth County, but also much of the Triad and Northwest North Carolina west of the Guilford County line.

“We draw shoppers from the north, west and south who find Hanes Mall to be a convenient traffic choice as well as shopping choice,” Gwinn said in a January 2017 article. “We’re in a demographic that continues to grow, continues to diversify, continues to prosper.”

Lim has a similar expectation of a mutually beneficial relationship between Truliant and Hanes Mall’s existing retailers.

“I think (Truliant) will help to bring new life to the mall, especially post-COVID-19, when a lot of national retailers are closing stores in smaller markets like Winston-Salem,” she said. “It makes sense for companies to want to operate here, as it gives their workers the benefit of having stores and restaurants close by while generating traffic for these businesses. The mall owner stands to benefit from stable tenants like Truliant and Novant Health.”

However, the loss of a second retail anchor could compel, if not require, Hanes Mall and CBL to lower their lease rates, Beahm said.

“Certainly mall tenants will be looking for rent consideration in the future, as well as more traffic-building initiatives, because there will be fewer anchor retailers to draw new shoppers to the mall on a daily basis,” Beahm said.

CBL said in a statement that “we don’t publicly discuss the details of our leases.”

Dave & Buster’s

One hope for diversifying the mall’s tenant base was attracting Dave & Buster’s as a nontraditional anchor.

The restaurant debuted in May 2019 in a 30,200-square-foot space on the mall’s lower level, next to the shuttered Sears.

Dave & Buster’s mixes more than 11,000 square feet of outsized arcade-style games with a restaurant and sports bar. The space also features 40 large-screen TVs topped by two 120-inch displays.

Although its demographic sweet spot is ages 21 to 35, there are plenty of options for those younger and those wanting to take a nostalgic trip on Mario Kart or Galaga.

It had as many as 232 employees — most starting out as part time — and nine managers. The workforce includes servers, bartenders, hosts, line cooks and game techs.

However, the restaurant chain closed in March because of the pandemic. It has yet to announce reopening plans, as it awaits a potential Phase Three in North Carolina that would allow for more than 50% indoor patron capacity.

Gov. Roy Cooper announced on Wednesday extending the Phase Two restrictions through July 17. Those restrictions include prohibiting arcades, such as Dave & Buster’s, from being open.

On Tuesday, the N.C. General Assembly gave final approval to legislation that would permit the reopening of amusement parks — such as Carowinds — carnivals, arcades, fairs and venues that host parties and other social gatherings. The House voted 66-49 in favor of House Bill 258 and sent it on to the governor. Cooper has vetoed two similar reopening bills — HB536 and HB594 — so it’s likely he will do the same with HB258.

Dire outlook?

Retail analyst Vince Tibone with Green Street Advisors, a commercial real-estate research firm, said during an April 29 webinar that he expects “a little more than half of all mall-based department stores to close by the end of 2021,” according to the trade publication RetailDive.

Tibone was not available for comment to the Journal.

According to the RetailDive report, Tibone predicted that within two years, traditional malls overall are likely to see a 20% decline in cash flow compared with 2019, which will “accelerate the demise of many malls.”

“J.C. Penney is likely to close a lot, if not all, of their stores,” he said. “A lot of malls in the country will have two or more vacancies, and that’s a very difficult place to come back from.”

Tibone cautioned that pursuing a more diverse mix of tenants, such as medical offices, office space and hotel or residential tenants, may not make as much real-estate sense “like they did pre-COVID.”

According to the International Council of Shopping Centers, there are 620 super-regional malls and 600 regional malls nationwide, with Hanes Mall fitting into the former category.

Cowen & Co. analyst Oliver Chen said in a recent report that as many as 400 of those malls could close between now and the end of 2021 — in part because of the loss of retail anchors and other key tenants.

Hanes Mall’s niche as a regional mall serving Forsyth County and Northwest North Carolina is likely to help it survive the pandemic’s impact on retailing, said Keith Debbage, a joint professor of geography and sustainable tourism and hospitality at UNC Greensboro.

“What you see in the Hanes Mall area is a trend line with a rapidly changing mix of clients,” Debbage said. “The demise of traditional shopping malls in the e-commerce era simply accelerates these processes.

“The recent news regarding Truliant fits into these larger dynamic transitions, and we should look for more changes like this at Hanes Mall.”

rcraver@wsjournal.com

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