Business Valuation Studies and Reports Follow a Fluid Economy to Present Accurate Assessments
Here is a good trivia question: Where was the world’s first mall? Believe it or not, it is still standing and as you’d expect, it’s an All-American innovation:
Southdale Center is a shopping mall located in Edina, Minnesota, a suburb of the Twin Cities. It opened in 1956 and is the oldest fully enclosed, climate-controlled shopping mall in the United States. Southdale Center comprises 1,300,000 sq ft (120,000 m2) of leasable retail space, and contains approximately 123 retail tenants. The mall is partially owned by Simon Property Group and is anchored by Herberger’s and Macy’s.
You have likely seen many malls come and go because they didn’t adjust to shopper’s needs, were poorly situated, or were victims of our ever-changing economy, so Southdale is truly a phenomenon.
Every mall has a fundamental need: anchors. These are usually the large retail department stores that have the wherewithal to commit to long-term leases and enjoy such popularity that they can draw many shoppers to the mall for all-day shopping binges that include smaller shops and eateries. With more people buying online, malls may lose some business and therefore the traditional anchors like Sears and J.C. Penney are closing. Who will replace them?
Everyone Has to Eat
Restaurants and other food tenants used to take up just 10 or 15 percent of a shopping center a decade ago. They occupy anywhere from 20 to 40 percent today, according to research from real estate services firm the CBRE Group. As a result, malls and shopping centers are offering more upmarket dining options. In a $30 million renovation to the Oakbrook Center mall in Oak Brook, Illinois, for example, the former Neiman Marcus store was subdivided into two restaurants: Perry’s Steakhouse and Old Town Pour House.
Large restaurants like The Cheesecake Factory are becoming anchors for malls, and instead of going shopping and “grabbing a bite” some people are going out to dinner at anchor restaurants as their primary destination, then maybe doing some shopping.
How Are Restaurants Changing?
The way people eat is changing. More people than ever are ordering take-out and delivery. You’ve seen the separate areas of most fine restaurants with a team of dedicated employees just preparing orders to go. The delivery industry has changed dramatically with apps like Uber Eats and Door Dash. Diners are more concerned than ever about healthy meals and natural ingredients so they often rely less on frozen shipped ingredients and more on locally grown food. As diners tastes change, so must the restaurants or they fail.
How Does This Affect Business Valuation?
Every business evolves and restructures their models for pricing, inventory, menus, and operations. Malls are the “mother ships” of the U.S. retail industry and their value may fluctuate significantly in a short time span based on many factors. At ValuationUSA we have the experience and credentials to weigh all factors when preparing a report for a major shopping center, a restaurant, or a chain of stores because our team of consultants work hands-on with business valuation studies every day involving dozens of industries.
Graphic: How are Consumers Buying?