By Perry Lefko

Are American consumers ready to buy a car at a shopping mall?

The company that owns Mall of America in Minnesota and American Dream in New Jersey said it is in discussions with potential auto-retail tenants for its massive shopping and entertainment centers. Triple Five Group, based in Edmonton, Alberta, has already drawn a Toyota dealership to its West Edmonton Mall, a high-profile theme-park retail venue in Canada.

While the explosion in online shopping has challenged shopping centers across North America — Triple Five disclosed that it lost $64.3 million on American Dream last year — partnerships between dealerships and malls could reap cross-marketing opportunities, according to retail experts.

“We’ve always wanted car dealerships in our shopping centers, but what has made [this attractive] is it is taking up excess space left by traditional anchor-type retailers,” said Triple Five spokesman Daniel Person.

While the explosion in online shopping has challenged shopping centers across North America — Triple Five disclosed that it lost $64.3 million on American Dream last year — partnerships between dealerships and malls could reap cross-marketing opportunities, according to retail experts.

“The COVID-19 pandemic has been the great accelerator for online shopping and particularly hard on many of the typical merchants in malls,” said Michelle Wasylyshen, spokeswoman for Retail Council of Canada. “However, even with foot traffic down, popular malls still offer significant potential for auto dealers to showcase their vehicles, and a valuable partner to malls looking to grow their appeal, while addressing unanticipated vacancies.”

Now that more of the vehicle sales process is online, dealers can consider different approaches to in-person shopping and may find attractive opportunities in malls. Challenges can include architecture limitations or the service department’s needs.

Triple Five Group struck a lease agreement in 2020 with Edmonton-based Prestige Auto Group for a 118,000-square-foot Toyota dealership that is currently under construction. Mayfield Toyota is scheduled to open in September and will occupy two floors in a location previously occupied, in part, by a Sears department store. The site will include a showroom and a service department with 72 bays.

Person said replicating a similar design at its U.S. malls would be problematic, but modifications are possible.

“The challenge with Mall of America is the space that we have is on the third floor of the building. It’s not that accessible to drive in and drive out, and American Dream is similar,” he said. “To do a facility the way we’ve built it in Edmonton would be challenging for us in the other two locations, but it’s not to say we wouldn’t consider a variable of sorts.”

Person said Triple Five was in talks with “a number of luxury brands” for the New Jersey mall and also a major U.S. dealership group for the Minnesota center. He declined to elaborate.

Dealer associations interviewed by Automotive News saw both benefits and challenges for retailers considering a mall as their new home.

“I don’t know exactly how it would work to service and sell vehicles, but as long as malls require a few more tenants it’s not a bad delivery model,” said Scott Lambert, president of the Minnesota Auto Dealers Association.

“There’s always going to be questions about parking, but it seems like a fairly natural fit. I think it’s a definite possibility. It makes a lot of sense.” He added that two- and three-story dealerships are not new to the state.

“It’s not that unique a floor plan for dealerships, but to fit into an anchor store or formerly an anchor store in a mall, that’s a good use of space,” he said. “It’s probably a little cheaper for a dealership to retrofit as opposed to building a new facility.”

While underutilized mall space might be a good fit for auto retail in theory, it won’t necessarily work in practice, said James Appleton, president of New Jersey Coalition of Automotive Retailers.

Displaying large numbers of gasoline-powered vehicles in a mall could create a fire hazard, requiring significant safety retrofitting, Appleton said in an email, although that may not be an issue for electric vehicles.

Depending how it is done, he warned, relocating to malls could run afoul of franchisor requirements.

“Automakers, for the most part, won’t permit sales-only locations,” he said. “While mall locations may be suitable for sales they wouldn’t be suitable for service.”

But if architectural matters can be resolved, partnerships between malls and dealers could become a trend, said Michael Kehoe, broker/owner of Fairfield Commercial Real Estate Inc. in Calgary, Alberta.

“The synergistic traffic benefits between a car dealership and a mall are perfectly aligned,” he said.

“The service visit is a minimum of three hours, so that provides great shopping opportunity for the mall. There’s great cross-shopping potential there.”