Appraisal Matters

Theatres are an integral part of a regional mall.  They draw huge numbers of people.  We have a great example of that in Arundel Mills, a racetrack-designed super-regional mall.  During weekends (typically the peak shopping days of the week), almost all parking spots will be filled around the theatre and extending for some distance away due to overflow.  The other parts of the mall, which account for about 70 percent of its size, have parking available aplenty.

Theaters are also important to the retail stores that are closest to it.  Have you ever noticed those retailers?  What you’ll typically find is that almost all of the dinner restaurants are located near the theater.  If dinner restaurants cannot be attracted to the space (as in second and third tier regional malls), the tendency is for fast food restaurants to fill that niche.  Also, take a look at the other retailers.  You can expect to see stores that cater to the demographics of the movie-goers, such as music stores and small electronic sale stores.  Maybe even a bookstore.  You won’t find many fashion or sporting goods stores.  It’s about the draw for “dinner and a movie”.  So in essence, a theater can do more than just provide an anchor - it can carry an entire wing.

Stadium Seating Versus Traditional Seating

It’s no secret that stadium seating theaters command the market; however, the effect on non-stadium seating theaters (which I will call traditional seating theaters) is dramatic.  The advent of stadium seating in a market forces existing theaters into a lower market tier.  I have seen ticket prices in older theaters drop 25 percent on the day the first stadium seating theater opened.  There goes the profit!

Another impact is that first-run movies tend to shift to stadium seating theaters because those chains pay more for them than most chains with traditional theaters.  This results in less patronage at a second or third tier theater.

The combination of lower ticket prices, a decline in the high-profit level food and soda sales and less patronage to the “new” factor adversely affects a traditional cinema’s revenues.  The result is that traditional theatres frequently attempt a rent renegotiation.  This is not good news for a landlord.

Conclusion

So the next time you go to a mall that has a cinema during the evening, take a look at the tenants.  Then take a look at the volume of people nearby versus other areas of the mall.  If you don’t agree that theaters aren’t among the most important anchors in a mall, let me know.  Maybe I’ll by you dinner and movie!

John Simpson, MAI