Are You my Landlord or a Carnie?

Ever been to a fair, carnival, or amusement park? Well assuming you have, you certainly know the weird but lovable shucksters that work there, trying to taunt you with the promise of a 13 foot stuffed gorilla with fast talk while your kid's pleas and cries begin to burn a hole in your pocket. These folk operate all of the little games that seem all too winnable, that is until you actually try them (do those rings even fit around the bottles? are those milk bottles glued to the surface?). The bottom line is that these carnival operators, or carnie's, as I like to refer to them as, will do just about anything to get you to spend money at their booth.

This concept seems all to familiar to retail landlords of regional malls, power and lifestyle centers. The only thing worse than a rainy day to a carnie is a dark store to a landlord. And landlords aren't being all that shy about it either. A recent article in the New York Times showed that a burgeoning trend to fill up the mounting oceans of vacant space is, well, water.

In more than 12 malls across the country, the Flowrider, an indoor wave pool, is filling up once vacant blocks of space emptied by retailers gone bust.

“Landlords are scared,” said Suzanne E. Mulvee, a real estate strategist with Property & Portfolio Research. “Part of the reason they’re scared is dark space doesn’t pay.”

This phenomenon has begun to grow roots ever since big ticket tenants like Circuit City and Linens N Things filed for bankruptcy. Landlords began scrambling for replacements tenants. Downscale chains that landlords once kept out of shopping centers are suddenly being shown the welcome mat. Temporary stores are popping up. Once-small retailers are being invited to take over big spaces, while the strongest national chains are seizing the moment to move into new cities at low rents. And vast mall spaces formerly occupied by department stores may soon be carved up or turned into community colleges and dance studios.

The Flowrider might ordinarily be a great co-tenant of a swimwear store, a surf shop, or a Chuck E. Cheese. Yet, its making waves (brutal, I know) in regional malls of all shapes and sizes. And it makes perfect sense too.

When the nation’s stores March sales results came out last week, the numbers were down yet again — especially for department stores and mall chains, which have been the weakest performers for months.

That does not bode well for mall owners. As more stores have closed, mall vacancies are at their highest point in almost a decade, according to Reis, a research company, which said the vacancy rate at the end of 2008 was 7.1 percent, compared with 5.8 percent at the end of 2007. Other analysts have slightly lower figures, but all agree that vacancies are rising.

And so, with what is likely great disdain, and a heaping pile of humility, retail landlords are considering what they have to in order to service the bottom line and keep their centers occupied. And while we all may think its a somewhat goofy notion, the underlying theme is one that most of us can relate to. If a Flowrider is more likely to pull you, or your kids, to the mall, then its a win for them. If not, then don't be surprised if they start throwing in free 13 foot stuffed gorillas as an added incentive to get you off the couch and in their stores.