Northgate Associates, the operator of Northgate Mall, announced Thursday that it is working on a new master plan for the shopping mall, an action spurred by Wednesday’s announcement that the Macy’s department store located there would be closing.
The closing of the Northgate Macy’s came as part of a larger shuttering of 68 Macy’s stores, part of an effort to streamline costs for a department store that had seen sales across its chain fall.
Macy’s, which will close its doors sometime this spring, is one of two major anchors at the Durham mall. The other is Sears, which announced on Thursday that it would be closing 150 stores -- but not its Northgate store -- and is selling its Craftsman tool brand after its revenue has continued to decline.
With many large department stores struggling, it is not surprising that Northgate would begin to think about how it will transition to a future that isn’t dominated by big box retail.
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“Northgate is working with the Macy’s team on a transitional plan for their Northgate location,” said Ginny Bowman, managing partner of Northgate Associates, in a statement. “As well we are working on our master plan of changing the shopping complex from predominantly retail spaces to a variety of uses including office, fitness, entertainment, and seasonal operations that reflect the needs of area consumers.”
Bowman declined to speak further about the mall’s plan, but the mall has recently signed non-retail tenants to its available space. In November, education testing company Measurement Inc. said it would be moving some of its workforce from downtown into Northgate, leasing some 20,000 square feet there for office space.
While there are many reasons why traditional malls built in the 1970s, 1980s and 1990s have struggled, Duke economist Ryan McDevitt said one reason is because the department stores have gotten stuck in the middle ground between low-end retail and high-end retail.
“I think these malls are facing pressure on both sides,” he said. “On the low end they're cannibalized by Target and Walmart, the low-end discount retailers that have everything you used to get in department stores, and then on the high end you have specialty retailers and the trend of consumers moving to the urban core and downtown.
“They're stuck in the middle and there's not much left for them to feast on.”
He said department stores were also hurt by not moving into the digital space quickly enough, letting online retailers, specifically Amazon, dominate them there. He added that it will be hard for Macy’s and Sears to reinvent themselves at this point, and that they’re likely to eventually go the way of Blockbuster and Borders.
Without anchor tenants such as Macy’s or Sears, malls like Northgate are forced to find more retail tenants or reimagine how their space can best be utilized.
“It's a fantastic piece of property and it's so highly visible and such a critical piece for that part of the Durham community,” said Geoff Durham, the president and CEO of the Greater Durham Chamber of Commerce. “The challenge is do you decide to completely recreate yourself?”
Durham believes that Northgate has a wide variety of options to take for a post-department store future. One option would be to re-tenant those spaces with more retail — but that would be a short-sighted approach, he said.
Instead, the mall could look to transition to service retail, bringing in businesses such as gyms, entertainment options or grocers. Or it could look toward professional services such as doctors, dentists, real estate or insurance who might be looking for more affordable rent in the city.
Durham said he has even seen some malls, such as Springfield Town Center in Fairfax County, Virginia, plan to turn parts of their property into multi-family and office buildings.
That’s something McDevitt agrees with. He said the malls he has studied have found many different ways to transition to a more diverse focus, bringing in big-footprint restaurants or experience-based retailers, such as outdoors shops.
He added that he has also seen traditional malls turn to leasing their spaces to schools and colleges for use. It could also copy its deal with Measurement Inc. and continue to make available more office space in the mall — something McDevitt said makes sense with the trend in office space toward more open floorplans.
“It's got a wide variety of options right now, and with the proper analysis they are going to make the right decision,” Durham said, addings it’s not a woe-is-me situation yet.
One definite bright spot for Northgate is the location of the mall itself. The mall sits just north of downtown and is easily accessible from Interstate 85 and other parts of the city.
McDevitt said he believes the vibrancy and growth of Durham makes the property viable for transformation.
“If this were in Flint, Michigan, we would be having a different conversation,” he said.