Isetan, part of the Isetan Mitsukoshi department store group headquartered in Tokyo, closed its Central World store when the lease expired at the end of August 2020, leaving tearful employees, 30 years of memories and a big empty box. It is now being transformed into what Central Pattana, the mall’s owner, calls an ‘urban lifestyle destination’. The redevelopment was supposed to open last year but has been delayed, possibly to as late as 2023.
Unsurprisingly, the disruption to normal business and lack of clarity about the outlook has been unhelpful to the releasing process, which would result in the space being divided into multiple zones with a variety of anchor and specialty retail tenants. Tenant negotiations are still underway, according to the company.
Department store closings: From great terror to great opportunity
The issue of what to do with empty department store boxes like the Isetan at Central World has gone through several phases in the history of the mall industry. Now it is considered a huge opportunity for the mall owner, particularly in high-profile locations where there are a variety of options for chopping up the space. It hasn’t always been that way.
The early years of the consolidation of the department store sector were the years of the Great Terror for mall owners. Department stores, after all, had historically been one of the key drivers of the dizzying expansion of the regional mall industry — lenders would not go near a large mall project that didn’t have a department store commitment. But obsolescence crept in over time as new competitors emerged and brands wanted to have their own boutiques outside of the department store envelope. Specialty stores, factory outlets, e-commerce, the blows kept on raining down.
This problem of department store obsolescence was recognized first in America, but spread quickly to other developed countries like the UK and Australia that also had a superabundance of underperforming department stores on long leases. (Mall owners outside of America were quick to say the situation in their own country was different, but really it was just a matter of degree and the problem was universal.)
Effective solutions to address department store vacancies weren’t long in coming though, and over time the Great Terror turned into the Great Relief, followed by the Great Opportunity.
What can you do with a vacant six-level department store space like the one at Central World and others like it?
The location, of course, will guide the solution, and in the case of Central World its perch in downtown Bangkok is mouthwatering. Each level can be made into its own precinct with a distinct flavor, like a liquorice allsort. Each of the allsort slices can be assigned to a gym, retail specialty, food hall, supermarket, events, performance and art spaces, schools, and so on. The list is long.
Flexible workspaces are another part of the solution, consistent with the Covid-driven transformation away from five-days-a-week commuting to centralized offices. Such work spaces also cohabit well with a host of complementary uses such as cafes, gyms and office supplies.
Other solutions are more radical but nonetheless common, particularly in suburban locations where land is less expensive and a mall owner can knock down the whole box to convert the space into an outdoor lifestyle centre, typically with an allocation of about 50 per cent to food retailers.
With the promise of Covid being a temporary interruption to normal business at Central World, Isetan’s departure after three decades speaks to a steady long-term decline in the ability of the store to drive traffic, with the pandemic merely being the last straw. The sprawling Isetan, like those in neighbouring Singapore and Malaysia (it has three department stores in Singapore and three left in Kuala Lumpur after closing one this month), had a focus on Japanese products and Japanese food. This catered well to local expats and the Japanese tourists that used to throng to Bangkok until the Thai government closed the country’s borders in early April, 2020.
But it was a one-trick pony and needed a better reason to exist even before 2020, particularly with the spectacular menu of fresh retail options springing up all around it in the Ratchaprasong neigborhood. It’s a sign of the times that shoppers everywhere, including Thais, love Japanese products but prefer to shop at Muji and Uniqlo than Isetan (both are represented in Central World.)
Department stores still have a big following in Asia and tend to have advantages that many of their peers elsewhere in the world lack. For example, many are operated by the mall owners themselves, who have long experience as both property managers and retailers in their own markets. For example, Central World’s owner, Central Pattana, also operates the Central Department Store that anchors the south side of the mall.
Another advantage of Asian department stores is that they rely heavily on the concession model rather than directly operating their own boutiques. This gets them out of loading up with costly inventory and ensures that the brands have control over their merchandising and selling.
Still, a growing number of Asian department stores are running into trouble and closing. Now though, rather than terrorising the owners of the shopping mall they anchor, their demise is coming to be increasingly welcomed. It’s a superb opportunity to redevelop with a more vibrant tenant mix. It is also an opportunity to rebuild the communities that have been fractured so badly by Covid containment policies.
A message on the Thailand website landing page of Isetan reads “Memories Last Forever”. Forever, unfortunately, has its limits, because directly underneath are the words “’til 31 August 2020”. Forever will also have a shelf-life date for other department stores in the region, particularly after two years of down-time during which e-commerce – never a strength of department stores – has been elevated to a new level.