With change at Dillard’s, what’s the future of Towne West?

In 2014, Towne West Square became one of Simon Property Group’s smaller, less valuable malls spun off into a real estate investment trust. Also, that year, Towne West lost its Sears anchor store.
In 2014, Towne West Square became one of Simon Property Group’s smaller, less valuable malls spun off into a real estate investment trust. Also, that year, Towne West lost its Sears anchor store. File photo

The lights and music were as bright as ever at Towne West Square on Thursday, but an invisible cloud hangs over its future.

Dillard’s, the mall’s largest tenant, announced a day earlier that it would close one of its two locations at the mall and convert the other into a clearance center. It has had two anchor spaces at Towne West since it expanded into the old Montgomery Ward space in 2001.

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Here and there, store employees could be heard talking softly about who would stay at the store and who would not.

“What we’re doing now is consolidating the stores into one location – in what is now the men’s store,” Dillard’s spokeswoman Julie Bull said. “That store will be operational as a clearance center store. What is now the women’s store will be closed.”

It’s another blow to the mall, which has taken quite a few hits in the last 10 years as more west-siders shift their shopping to North Maize Road and online.

In 2014, the mall became one of Simon Property Group’s 108 smaller, less valuable malls spun off into a new real estate investment trust, Washington Prime Group. Also, that year, Towne West lost its Sears anchor store.

In December, Convergys – a call center that took Sears’ place at Towne West – said that it would lay off 231 of its 358 workers because of a contract expiration, but that it would remain in the location.

The mall also hasn’t been helped by the aging of the once-vibrant retail district around it. Just this week, Sears Holdings announced it would close its Kmart store next to the mall by March.

In the mall, barber Tim Smith said he was sad to see part of Dillard’s close.

“That hurts everybody’s business,” he said. “With them being gone, it will cut down on walk-in traffic. That’s what we live on.”

What’s coming

In a presentation to analysts this week, the Washington Prime Group laid out a vigorous plan for selling or spinning off its worst and best properties.

That will allow it to focus on the bulk of its malls, more than 100 across the country, pouring $150 million to $200 million into renovating them and keeping them leased up.

It’s not clear where Towne West Square fits into this plan. Washington Prime Group declined to comment.

Washington Prime Group is very much a retail-property business, but it is open to alternative uses for the space. In the presentation, the company commended the leasing team for renting the Sears space at Towne West to Convergys at a significantly higher rate than it did to Sears.

Local developer Gary Oborny said the owners of Towne West will have to transform the 941,000-square-foot building with more office or service tenants such as Convergys.

Oborny bought the 30-year-old International Trade Center in Overland Park out of foreclosure in 2014. Although it had office users, it was generally pitched as event and wholesale space.

He renovated it and touted it as high-quality open space to large office users from the Kansas City area. It’s now largely filled up, he said.

“You can try for more big-box retail, but some of those guys are not super active right now,” Oborny said. “The alternative is to turn it into a larger office/service type of place.”

But Oborny said the key challenge in any kind of change of use is keeping the existing mall stores happy.

A mall is an organic whole, and the smaller stores depend on the anchors and one another to bring in a large volume of shoppers. The people working at Convergys probably don’t buy as much at the mall as the Sears shoppers.

If more space becomes offices or health clubs, at some point the other stores will reconsider their interest in staying.

Tom Johnson, president of commercial real estate firm Martens Cos., said he is optimistic in the short term that the Dillard’s clearance center will bring in strong traffic and the rest of the mall will remain decently strong.

But, Towne West is like a third of malls nationally that are facing long-term trouble because of changing geography, demographics and competition.

The real estate profession is all about finding the best use for a building at the time. Downtown, once the city’s office center, is now seeing rapid growth as a residential, dining and entertainment center. The former Wichita Mall, 4301 E. Harry, now houses the Starwood Hotels contact center, Bethany College at Mindfire classrooms, a variety of offices and a few retailers.

“You have to look at it from a positive perspective,” Johnson said of Towne West. “It’s well managed. It’s well maintained. It’s been there a while, and it’s time to look at other options out there.”

Contributing: Roy Wenzl of The Eagle