After 34 years, JC Penney, an anchor of the Hudson Valley Mall since the mall’s opening in Town of Ulster in 1981, is no more. Also gone are The Children’s Place, Deb Shops, and RadioShack, the last two victims of corporate bankruptcy. And across Route 9W, Office Depot, located in the hangar-like building that once housed the area’s first supermarket, is set to close its doors in a couple of weeks.
The closings comprising this latest wave of retail contraction are related to serious corporate issues, but they also signify an ominous shift in the local retail landscape, according to Terry Parisian, general manager of the Hudson Valley Mall and a Saugerties Village Board trustee.
Major stores have come and gone before at the mall: when Kmart, another anchor, closed in 1995, the store was vacant for a couple of years before the space was reconfigured into Best Buy and Dick’s Sporting Goods, a part of the mall that was further expanded with the opening of Target in 2001.
But this time around, the mall’s reinventing itself might be more difficult. While high-end malls are thriving, mid-market malls anchored by Penney and Sears are struggling nationwide, reflecting the growing disparity between the rich and the middle class. It’s a trend that’s mirrored locally: in a column in the Saugerties Times published in early January, the publisher of this newspaper reported on the growing income disparity in Ulster County. “The statistics show that the 1,705 Ulster County [tax return] filers with incomes of $200,000 or more in 2011 generated more adjusted total income than all 49,126 filers with incomes below $40,000. That’s inequality on a grand scale,” he wrote.
According to consultancy Green Street Advisors, a fifth of the nation’s malls have vacancy rates of 10 percent or more. Three percent, triple the number in 2006, are considered “dying,” with vacancy rates of 40 percent or more. “If you look at the stores from a corporate viewpoint, the decrease of the middle class means that of course you have underperforming stores, which they are forced to close,” said Parisian.
Three years ago, the Hudson Valley Mall had an occupancy rate of 98 percent. Now it’s in the mid-80s.
Parisian thinks the region’s lackluster economic demographics make it hard to find new retailers, said Parisian. He pointed to a Marist Bureau of Economic Research study which found the median household income of Ulster County is below the national average and declining. The study also showed that the population has declined 4 percent, compared to an increase of 5 percent in 2007 — a year before the Great Recession. “Until things change, we’ll see more of this happening,” he said. “The current demographics of the county means it makes no sense for stores to exist here.”
No middle class, no mall
Parisian said sales are down 4 to 5 percent compared to 2007, the mall’s best year. Nationally, with overall online retail sales leveling off to 10 percent annual growth, he said he doesn’t believe that the Internet is to blame as much for the decline as the loss of household income of the middle class. Seventy percent of the GDP is driven by consumer spending, and of that, 90 percent consists of middle class workers, he said.
However, people’s busy schedules and the Internet is having an impact on shopping habits, he said. Shoppers spend less time in the mall, which has negatively affected the food court; while once the mall had three sit-down restaurants, now it has none. “Foot traffic is down at the mall,” Parisian said. “People are doing their shopping online and coming to a brick-and-mortar store to buy the item.”
But he also lamented the local resistance to new job creation in the county, as illustrated by the successful fight led by citizens against a Niagara Bottling plant locating in Town of Ulster. In order to attract stores, “you have to show growth,” he said. “When retailers want to locate here and see a manufacturing company for 120 employees shut down, what reason do they have to establish themselves here?”
He also noted that the mall is a significant employer. “When I did a mixer at the end of 2014, we had 1,100 employees,” of which 60 worked at JC Penney. Some are part-time workers, but “until people get off their horse about no industry here in Ulster County, every little bit helps.”
Sears seems to be staying
According to the terms of its second five-year option on its original 20-year lease, JC Penney will be paying rent until 2018. Sears, another mall anchor and troubled national retail chain, also has exercised options on its lease through 2018; despite rumors, Parisian said so far there’s no word it plans to close its mall location.
He said the amount of rent wasn’t an issue. “Every lease is different, but if you take a look at Penney’s, they did their lease in 1981 so their rent is not a driving factor.” The common area and maintenance charges tenants pay, in addition to utilities, are stable, although he acknowledged “most tenants want their own entrances.” (Newer malls resemble city streets, with stores arranged on a grid of sidewalks and roads. Poughkeepsie’s South Hills Mall, which began life in the late 1970s as an indoor mall, was remodeled along those lines in 2008.)
In getting new tenants, Parisian said the current strategy was to look beyond retail. “We’re starting to see more mixed use instead of just retail — more restaurants, amusement and fitness centers, spas, doctor’s offices, and libraries.”
While the trend is to buy local and it’s fashionable in some circles to lambaste the mall, many people depend on it, and the other large chains, for their basic shopping needs, and some for their discretionary purchases as well.
Eroding the tax base
The negative repercussions go beyond the lost jobs — Office Depot employed 24 — and lack of convenience for shoppers. Town of Ulster Supervisor James Quigley noted that the large retail chains contribute significantly to the county’s tax base. PCK Development, the Syracuse-based owner of the mall, carries Ulster’s fourth largest equalized taxable value: $87 million. TechCity, the former IBM property is fifth at approximately $63 million and Walmart and Sam’s Club is number six, at nearly $50 million.
Quigley said after the mall filed a lawsuit in 2009 to reduce its assessment, town of Ulster agreed to a settlement in which the mall got a $16 million reduction. “Post settlement, you can’t grieve your taxes, but that’s expired, and they’re coming after us again. Fifty-seven percent of the tax base in Town of Ulster is commercial properties. Everybody looks at town of Ulster as a being a great success because we’re a commercial hub, but they don’t consider the financial risk that comes with our positions. Every one of these business can write a check to protect their taxes and they do.”