LOUISVILLE, Ky. (WDRB) – Pleasure Ridge Park resident Tracie Stull and her grandson Kingston were on the way to the food court at Jefferson Mall on Wednesday when Kingston discovered something a lot more tantalizing than lunch.
Inside Round1 Entertainment, the 5-year old wielded a toy gun while playing the Terminator game, one of 300 arcade terminals that ding, buzz and pulse with colored light in a sensory assault.
In addition to the arcade games, Round1 has a bowling alley, billiards, karaoke rooms and a restaurant and bar.
“It’s a bit overwhelming … but it’s nice. I really appreciate having something like this to take my grandkids to,” said Stull.
Round1, a Japanese company, took over a portion of the shuttered Macy’s department store space at the mall in November.
As consumers continue to shift to online shopping, forcing traditional retailers to shrink their footprints, entertainment-oriented concepts like Round1 are filling in some of the vacant space.
Dave & Busters, also an indoor arcade and bar, took over part of the space vacated by women’s clothing store Forever 21 in Mall St. Matthews last month.
Driving range concept TopGolf is set to be built where bankrupt chain Sears once operated in Oxmoor Center, though disaffected neighbors have mounted a legal challenge to the zoning approval.
Dart Rush, which is similar to Laser Tag but with foam dart guns, opened at Oxmoor in November.
Walmart closed three underperforming stores in Louisville last year.
Now, the former Walmart Supercenter on Hurstbourne Parkway near I-64 is slated to become an unspecified “indoor fun park,” according to preliminary plans filed with Metro government last month.
Fitness centers are also filling in some gaps. Crunch Fitness replaced the Goody’s store at Dixie Manor shopping center on Dixie Highway in November.
Planet Fitness is working on its 16th Louisville location in a space formerly occupied by Rite Aid in the Gardiner Lane shopping center on Bardstown Road.
But Louisville still has several ghosts of K-mart, Toys R Us and other big-box stores that haven’t been replaced.
More spaces will open up when Payless ShoeSource closes its seven Louisville-area stores in coming months. The Lexington-based parent company of Mattress Firm and Sleep Outfitters is in bankruptcy, possibly leading to more local closures.
Figures from real estate brokerage CBRE show the average annual rate of retail vacancy in greater Louisville, including southern Indiana, has been on the rise since 2015.
The retail “availability rate” was 7.8 percent in 2018, up from 5.9 percent in 2015, according to CBRE. Still, vacancies are nowhere near the 10 percent rates during the Great Recession in 2008 and 2009.
Meanwhile, the average asking price from retail landlords in the Louisville area has fallen slightly since 2015, from about $13 per square foot per year to about $11.50, according to CBRE.
Developers also continue to add space, growing the total retail square footage by about 20 percent since 2015, to 28.3 million square feet.
The National Retail Federation expects online sales to make up about 20 percent of the $3.8 billion retail market -- excluding car sales, gas stations and restaurants – in 2019. Online sales are growing at 10 percent to 12 percent a year, or three times faster than the overall market, according to the trade association.
For traditional shopping centers, entertainment- and fitness-oriented concepts help with a big challenge in the Internet age: drawing customers to their physical stores, said broker Clay Hunt of CBRE’s Louisville office.
“They view these users as a good opportunity to drive trip traffic and walkability to their center,” he said.
Ian Grossman, the general manager of Round1’s store in Jefferson Mall, said he’s noticed his customers spilling out into the mall to shop before heading home.
“When people come in to Round1, they actually don’t come in here and just leave. A lot of the customers will then venture out into the mall … Much like a Walmart, this has become a one-stop type of thing for them,” he said.
The entertainment concepts also benefit from chance encounters with shoppers, such as when Stull and her grandson stumbled upon the arcade on their way to food court on Wednesday.
“Anytime you get built-in foot traffic, it’s a good thing,” Grossman said.
In its home market, Japan, all of Round1’s locations are freestanding. But like in Jefferson Mall, Round1’s U.S. locations – about 30 in all – are attached to malls, he said.
In the days when department stores were thriving, a concept like Round1 might not have been able to afford the “top dollar” mall rents, Grossman said.
“Fifteen years ago it would have been less expensive to do a freestanding store than it would be to rent from a mall. But now with big spaces becoming available you are actually able to grab the square footage at a fair price,” he said.