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Small Business | ENTERPRIZE ZONE / Lessons and Insight
on Southland Businesses

Movies Fail to Work Magic

Not All Mall Merchants Are Fans of Complex

March 04, 1998|LEE ROMNEY and GEORGE WHITE | TIMES STAFF WRITERS

When Magic Johnson Theatres opened a state-of-the-art movie complex at Baldwin Hills Crenshaw Plaza 2 1/2 years ago, there were enough hopes to pack the house.

The $11-million complex--planted in underserved Crenshaw by former Los Angeles Lakers basketball star Earvin "Magic" Johnson--would help the mall lure big-name stores and upscale shoppers who had long taken their business outside the neighborhood, city and mall officials believed.

It would funnel thousands of potential buyers past the shops of struggling merchants. It would serve as the catalyst to revitalize a mall long plagued by a revolving door of business failures.

Today, Johnson's movie complex is among the top-grossing in the nation and recently broke ground for expansion. Sales at some of the mall's chain stores and at least two of its three anchor stores have risen. A chic Creole restaurant opened on Valentine's Day.

But for many smaller merchants, little has changed since the theaters moved in. Most disappointing, they say, is that problems plaguing the mall before the arrival of the movie complex persist. Mall officials still struggle to lure major tenants and when one pulls out--as the Gap recently did--a crisis of confidence ensues.

Paint is peeling from the handsome mall's mixed Art Deco and modern exterior, and some tenants say rents are steep. Quite a few of the independently owned stores, which make up 25% of the mall's mix, are still struggling.

Some say the theater crowds have not helped their sales. Others say it's had the opposite effect, actually hurting business as parking problems and the younger crowd drawn by the movie complex deter older, bigger spenders.

"Now you can see more people, but they are not shoppers. They are teenagers and they just like to look," said Levon Nazlikian of Levon's Jewelry, a mall tenant since 1988. He says his sales are down more than 20% from last year.

Kenneth Lombard, president of the former basketball star's Johnson Development Corp., said the theaters can bring in crowds, but they cannot teach merchants how or what to sell to them.

Across the country, shopping centers are increasingly turning to movie theaters as a way to boost customer traffic. A 1996 study commissioned by the International Council of Shopping Centers showed that about 60% of patrons of mall theaters shopped for about 30 minutes during their visit. But even mall owners who have seen such successes warn that theaters are not a panacea.

In the last few months, several second-floor shops at Baldwin Hills Crenshaw Plaza--including a shoe store, two women's clothing stores and an optometrist--have been shuttered, leaving neighboring merchants in the emptying corridor worried.

Since last year, at least three other stores, including the Gap, have packed up and left. Mall occupancy has hovered at about 80% since early 1997, down from a high of 95% at the end of 1995--five months after the theaters opened. Ten of the 27 second-floor stores now stand empty.

Fred Bruning, director of mall operations for Manhattan Beach-based Alexander Haagen Properties Inc., which owns the mall, said the 80% occupancy rate is just below the 82% average for malls nationwide. Sales in 1997 were $260 per square foot, up 5% from 1996 and slightly higher than the Los Angeles County average, he said.

A spokesman for the International Council of Shopping Centers said the national average for occupancy of comparable malls is 84%. Average sales per square foot at those malls was $291 in 1997. Independent stores typically don't do well at malls, he said.

"We can do a better job of leasing," said Bruning, who hopes to lure Victoria's Secret or Bath & Body Works. "But we're not taking the first offer for a vacancy if it doesn't help us create the right mix."

While Bruning remains optimistic, today's numbers pale next to earlier forecasts. Just before the theaters opened, Bruning predicted sales would reach $350 per square foot by the spring of 1996. At the time, sales stood at $260 per square foot--the same as today.

Many merchants took note and pulled up stakes.

"I started seeing the writing on the wall: Get out before it gets worse," said August Gagnier, owner of Gagnier's Creole Kitchen, which opened in 1989 and left last summer after mounting losses.

Gagnier, who now operates a smaller version of the restaurant at a food court on Santa Monica's Third Street Promenade, said business had picked up after the theaters opened but then plummeted as regular customers began avoiding the young crowds and dearth of parking. Sales in December 1996 fell 30% from the same month a year before.

Gagnier said theater construction and crowds drove the nail in his coffin, but he conceded that some key problems preceded the theaters' arrival. "They just couldn't get the brand-name stores in there that they needed," he said.

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