Mall feeling malaise from Ike, economy

By T.J. Aulds

The Daily News  

Published November 30, 2009

TEXAS CITY — When Mall of the Mainland opened in 1991 it was heralded as the shot in the retail arm Galveston County needed.  

As the first mall in the county since the Galvez Mall in Galveston fell into disarray, the Texas City mall boasted Dillard’s, J.C. Penney, Sears, Foley’s and Palais Royal. 

Eighteen years later and as one of the most challenging Christmas shopping seasons in more than a decade gets under way, the J.C. Penney space is empty. The company three years ago ditched the Texas City mall for a spacious spot at Baybrook Mall in southern Houston and a stand-alone store in League City.  

Another anchor, Dillard’s, abandoned the mall a year ago. 

Foley’s is now Macy’s, but along with Palais Royal and Sears, is still on site.  

Still, shoppers need not worry about having to elbow through crowds while strolling in Mall of the Mainland because, as mall owners acknowledged, foot traffic falls short of what its larger rival Baybrook Mall generates daily. 

The perception is the county’s only mall is on its last legs. Mall of the Mainland’s owners argue that perception is wrong but admit the challenges to make the shopping center viable are daunting. 

Liked The Potential 

When brothers Michael and Mayer Makabeh, of California, led an investment group that purchased the mall almost three years ago, they thought they had come into a market with huge growth potential. The economy was strong, oil prices had the Texas City refineries humming, and housing developments were springing up. 

Within a year, a “perfect storm” of economic and retail trouble struck. 

The national retail market already was wobbly as the housing and financial markets faltered. Then Hurricane Ike slammed into Galveston County in September 2008. Dillard’s, which saw its roof torn off by the storm, left town. 

Even with the storm’s destruction, the Makabeh brothers saw an opportunity. They figured some of the businesses in Galveston that were wrecked by the storm would consider opening up in the mall — at least temporarily — to generate some revenue for recovery. 

“We sent 700 letters, and we made calls offering to help,” Michael said, noting that the mall was willing to discount rental rates for Galveston stores willing to move, if even for a short time. “Ninety percent of the letters were returned, and none of the phone lines were working. We thought we could help, but we couldn’t reach anyone.”

The storm also caused about $2 million damage to the roof that is still under repair. 

Still, compared to the shopping centers the brothers operate in California — none of which are malls — the economic outlook here was relatively positive, the brothers said. 

“We are still talking to national retailers about Texas City,” Michael Makabeh said. “They don’t want to talk about California at all.” 

Perception Vs. Reality 

Walking through the mall, one could gather there is more empty retail space than stores. The Makabehs said that perception is wrong. 

“We are at 78 percent occupancy,” Mayer Makabeh said. He does not include the empty anchor stores of JC Penney and Dillard’s in that figure because the mall doesn’t own those buildings — the retailers do.  

“The mall is really only 300,000 square feet that we lease and most of that is leased out.” 

Michael Makabeh said because the vacant spots such as JC Penney are so wide, it gives a perception that few of the spaces available in the mall actually are leased. 

“Perception is reality, and people see there are not as many stores. We have to change that perception.” 

What is not just perception is the volume of foot traffic. While weekends tend to be brisk, the mall is mostly empty on weekdays. 

That’s not as negative as it might seem, Mayer Makabeh argued. 

The ratio of shoppers to lookers is actually pretty good, he said, estimating three out of five people in the mall make a purchase. He said the calculations were not scientific and were based on his experience and “seeing how many people have shopping bags” compared to those who don’t. 

Thinking Out Of The Box 

The Makabehs have had to find nontraditional tenants, including a few that are not in the retail business. Phobia, a company that operates Halloween haunted houses, took over about 12,000 square feet on the mall’s west end. Even though a seasonal operation, Phobia pays for a year-round lease, Michael Makabeh said. 

The old Dillard’s space is now the Texas headquarters for the Federal Emergency Management Agency, and for a while another small store front was used as the office for port security registration and screening. 

“We have had to think about other options,” Michael said. “We would like to see maybe a medical center or small hospital.” 

The mall operators also have leased space to local merchants. 

“Mall operators certainly have had to adapt their strategy,” Steve Brown, a professor of marketing for the University of Houston’s C.T. Bauer College of Business, said. While not talking specially about the Mall of the Mainland, he said the challenges faced in Texas City are similar to those faced by other malls. 

“They can move into the down market, encouraging the types of operators that would have not been in the target market,” Brown said. “It is probably not a healthy long-term move, but it fills the retail space.” 

Bring In The Crowds 

Linda Stroud opened Gifts by Linda a year ago. She said while traffic in the mall and through her store is “steady” it’s not generating a lot of business and warned if lease rates were to go up, she likely would close the shop. 

“The mall owners have not done enough to keep businesses here,” she said. “More stores need to open up.” 

The more stores discussion is much like the chicken-and-egg argument. Which came first — more stores or more foot traffic? 

“To get more people out there, you need more stores,” Jimmy Hayley, president of the Texas City-La Marque Chamber of Commerce, said. “To get more stores, though, you have got to get more people out there.” 

Michael Makabeh said the mall has tried different promotions, including special events, such as a trick-or-treat for Halloween, car shows, musical acts, health and safety fairs and anything that has the potential of attracting a crowd. 

The mall even was the site of a recent countywide swine flu vaccination effort by the county’s health district.  

The special events have helped, Stroud said. 

Stores with niche product lines reported solid sales.  

Akbar Ydawala, owner of T-body, said business in his skateboard accessories and clothing store remains steady nine years after he opened.  

“Our customers can’t find any of this anywhere else locally,” he said. “They would have to go to Houston, but they come here.” 

The national chain stores operators, including Macy’s, would not discuss store performance. 

Things Will Improve 

“No one can change an image overnight,” Mayer Makabeh said. “In the middle of (2008), we had a strong momentum to change the view of the public here. People stopped asking if we were going to close the mall and tear it down. They know we are here to build the mall back up.” 

In addition to promotional events, Michael Makabeh said the cinema recently remodeled many of its theaters and “really fixed the place up.” He said once the roof repairs are complete, plans call for several million dollars of remodeling in the mall itself. That, however, is contingent on the economy. 

The brothers hope the development next year of Texas City’s Central Park, behind the mall, and the conversion of an old Walmart store next door into the new home of the county health district and possibly the central appraisal district will generate more traffic in the area and bring more shoppers. 

“It takes hard work to be accepted in the community,” Mayer Makabeh said. “We have to work to gain that confidence.”

________________________________________________________

Kurt Koopmann

Public Information Officer

Galveston County Health District

Office (409) 938-2211

Cell  (409) 392-0007

kkoopman@gchd.org