The specter of ghost malls haunts the Bay Area

The Great Recession has brought an end to a great many industries – or at least changed them for good. Newspapers and auto dealerships are among the businesses that were teetering on the edge, when the economic crisis came along and pushed them off. Shopping malls also belong on that list. In fact, the great American retail center has been in decline for years. A website called deadmalls.com has been chronicling its demise since 2000, and dozens of malls have failed during that time. But now, things appear to be getting even worse. No less than five Bay Area retail developments filed for bankruptcy in December. Still, not all malls around here are in such bad shape. KALW’s Zoe Corneli brings us a tale of two shopping centers.

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ZOE CORNELI: “It was the best of times, it was the worst of times.” That, of course, is the beginning of Charles Dickens’ oft-quoted novel A Tale of Two Cities.  And I’m bringing it up again only because it fits so well with the topic of Bay Area shopping malls.

Dickens continues, "… it was the spring of hope, it was the winter of despair.”

Yes, this too is a story of opposites. We’ll start with despair.

I’m at Vallco Shopping Mall, in Cupertino. The side facing the street has been remodeled in clean lines. But to enter the mall by car, you have to drive through an unmarked tunnel, into a maze of hulking concrete parking garages.From there, you walk in through the backside of the building, which was built in the seventies.

I’m looking at the directory, and almost the entire first floor is listed as closed for construction, but I’m standing right in front of a storefront that is closed, but I don’t see any construction going on.

There aren’t many people walking around, but I spot a woman playing with two little girls on the stairs.

CLAUDIA RIOS: My name is Claudia Rios, and I come here all the time.

Rios lives in San Jose but works as a housekeeper near here. Her daughters are two-year-old twins Alexia and Isabella.

RIOS: Mainly I come here because it’s like a big open space and it’s empty for the children to run.

CORNELI: So how often do you actually shop or buy anything here?

RIOS: Food, most of the time, I buy, and there’s not many options … but stores, I don’t think I’ve ever bought anything here. (Laughs)

CORNELI: Most of the open shops are concentrated on the second floor, but right in the middle of the main hallway there are three empty storefronts clustered together, and one of them has a big wall plastered over with a poster advertising a leasing hotline. It says, “Retail, food court, restaurant space, 500 to 8000 square feet available.”

Right next to one of the empty storefronts on the second floor here is a shop called Gift Prints.  And the salesperson working in the store is actually sitting outside the store on a bench in the middle of the hallway waiting for customers to come by.

Twenty feet more down the hallway… more empty storefronts. Sam’s Grill, closed. The windows are dark. Another storefront with no labels, no signs, nothing on it, it’s just white. And next to that, Fine Stationers. Closed and dark as well.

I swing by the management office to talk to General Manager Mike Rohde. He’s been here off and on for 9 years, under different owners.  Most recently, he got a new boss last year, when the mall declared bankruptcy and changed hands. Rohde says Vallco spiraled downward after it lost tenants during major construction in 2007 and didn’t get them back.

MIKE ROHDE: The mall never really recovered completely from retenanting, and during that time period, the economic downturn happened, and lots of tenants were put on hold due to the recession and tight financing.

Rohde says both the mall and the stores that would like to open here are having a hard time getting loans to pay for move-in costs. According to the nonprofit California Reinvestment Coalition, the top lenders in California have cut their small business lending by more than seventy percent in recent years. Rohde points out, that’s despite the fact that many big banks have received federal TARP funds.

ROHDE: And so far that hasn’t trickled down.

CORNELI: Do you think if the loans were flowing, that there’s enough of a customer base to support the business?

ROHDE: Oh absolutely. Yeah. I mean, we’re in Silicon Valley and it’s a very thriving community, you know just here in Cupertino, you look at the household income and the Fortune 500 companies that are right around us, Apple, HP, you name it. We’ve got good company.

But for now, to survive, Rohde says Vallco has to get creative. The mall is considering adding more entertainment options.

ROHDE: I think it’s going to be one of those things where malls are kind of reinventing themselves along the way… it can be a good thing, you know where before, you would not have seen something unique in a mall like maybe a college or something.

Rohde says he doesn’t see the situation improving till at least the end of this year. Which means customers like dental hygienist Andrea Fletcher don’t have a lot of company. She’s browsing a display of gold earrings at a mostly empty Macy’s with her husband.

ANDREA FLETCHER: Well, we live in Sunnyvale which is not very far away, like 15 minutes away, but there’s not a mall in Sunnyvale, and so we come here for the theater. But as far as shopping, unfortunately there’s not a lot of stores here to shop at. So we usually end up at either Valley Fair Mall or Oak Ridge Mall.

Westfield Valley Fair Mall is just five miles away in Santa Clara. That’s my next stop.

Twenty minutes later, I’m standing in the makeup section of the Macy’s at Valley Fair Mall, and it’s a bustle of activity. One of the salespeople here is even doing a little dance to the song that’s playing over the loudspeaker.

I’m wandering through the hallways here, and I’m not seeing any empty storefronts or kiosks. In fact, right here, there’s a Tiffany & Co. store right next to a Kenneth Cole. And a little ways down there’s a jewelry store and a restoration hardware. This place has that larger-than-life, glossy, colorful appearance that was missing from Vallco. And the place even smells good. If it’s not freshly-baked pastries, it’s fancy perfume.

I come across Jiaqi Zheng, a business student at Northwestern Polytechnic University who lives in Milpitas. Her boyfriend is carrying some shopping bags, including one from Armani.  Zheng says this is one of her favorite malls.

JIAQI ZHENG: ‘Cause they have famous brands, like Armani.

Recession or no recession, people are spending money here.

So why is a mall like Valley Fair humming along while Vallco is suffering? For one thing, Valley Fair is owned by Westfield, a global chain with 50 malls in the US alone. A spokesperson told me the company is "very well-capitalized." So it can afford to keep the mall renovated and up-to-date. That, in turn, attracts more and better tenants, which attract customers, and the cycle continues.

There may be another reason for the difference between the two malls – it’s a phenomenon economists call a “flight to quality.” Sean Randolph is President and CEO of the Bay Area Economic Council Institute. He says rents in top tier commercial properties have come down. So some companies are moving there rather than to mid-tier buildings.

SEAN RANDOLPH: The higher end malls, the most desirable ones, will probably continue to hold and attract tenants, as will the higher grade commercial office buildings, but some of the ones that are mid-grade are likely to suffer.

He says that can have an impact on the surrounding communities.

RANDOLPH: You see fewer services, you see stores close, paper in the windows, that’s not good for the community or for the services. I don’t think this is going to be happening on a very large scale, but at least another year of kind of restructuring in the commercial retail sector before that turns around.

Which means, for mid-tier malls, anyway, another year of this Dickensian winter of despair will likely pass before we reach the spring of hope.

In the South Bay, I’m Zoe Corneli for Crosscurrents.

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