With retail rapidly changing, can Sunrise Mall keep up?

Sunrise Mall has proved to be surprisingly durable — and has a chance to prosper under new owners, according to some observers. Spinoso Real Estate Group plans to pump money into the mall, with physical upgrades and a new mix of tenants.

By some accounts, Sunrise Mall should be dead.

The enclosed Citrus Heights mall, which opened in 1972, is noticeably outdated. The decor, in the words of one Yelp reviewer, is “a little on the older side.”

The center hasn’t seen the flashy new retailers and restaurants that have opened at Arden Fair and the Westfield Galleria at Roseville, the region’s newer enclosed malls.

And like nearby Country Club Plaza, which is struggling, Sunrise caters to middle-class families that increasingly flock to discounters and the Internet to shop.

Yet the mall has proved to be surprisingly durable — and has a chance to prosper under new owners, according to some observers. Spinoso Real Estate Groupplans to pump money into the mall, with physical upgrades and a new mix of tenants.

Carmen Spinoso, owner of the New York-based company, thinks Sunrise Mall can be a strong and viable retail center.

“Malls in and of themselves are very viable venues,” Spinoso said. “The challenge is to keep them current.”

Analysts say those changes are badly needed. “Upgrade or die,” said Garrick Brown, vice president of retail research for Cushman & Wakefield. “I don’t want to say it, but that’s ultimately the reality in the mall business.”

Improvements coming

Spinoso knows the mall business. His company’s portfolio includes more than a dozen enclosed centers in cities ranging from Santa Fe, N.M. to the Chicago suburb of Bourbonnais, Ill. News reports suggest the company has a history of rescuing potentially troubled malls.

Last year, Spinoso began managing Great Northern Mall in upstate New York after the mall’s former owner defaulted on a $35 million payment and returned the mall to its lender, according to The Post-Standard of Syracuse.

Plans for Sunrise Mall are still in the early stages, and Spinoso said he’ll have a clearer idea within upcoming months. Shoppers should expect changes.

“Our plan is to make substantial improvements to the property,” he said. “We’re very focused on evolving and finalizing our plans. We think it’s going to generate a lot of excitement in the community.”

The previous owner also had planned renovations at Sunrise. In 2008, it cited goals such as adding more restaurants and clothing stores, as well as modernizing the mall’s movie theater. But eight years later, those improvements still haven’t been made.

Officials with the city of Citrus Heights are optimistic about the new ownership. “We are very excited about the new ownership of Sunrise Mall. They bring years of expertise and experience to our city,” said Citrus Heights Mayor Jeannie Bruins.

Real estate experts also are encouraged. Spinoso’s ownership “means great things” for the center, according to Ariel Fox, a partner with Retail West Inc., a retail brokerage.

Mall faces challenges

But Spinoso is trying to revive the mall at a time when major national retailers are closing stores. The industry is changing rapidly as Internet competition decimates mid-market chains.

Two anchors at Sunrise Mall, Macy’s and Sears, have announced significant closures this year. Some of its other retailers, such as Aeropostale and Express, have shuttered stores in other cities.

The mall is part of the Sunrise MarketPlace, a busy retail district, but lacks easy freeway access. Its image also is a problem. Retail researcher Brown called Sunrise a “solid middle-class mall” — a perception that could make leasing difficult at a time when mainly luxury and discount retailers are growing.

If luxury retailers won’t consider a middle-class center such as Sunrise, the attention turns to discount retailers, and the mall risks becoming primarily a discount destination.

Sunrise is similar to Country Club Plaza, another aging center that was built in 1968 at Watt and El Camino avenues and is now largely vacant. Both malls sit alongside older Sacramento neighborhoods, and both focus on tenants catering to middle-class shoppers.

Country Club Plaza, which is roughly half the size of Sunrise, began declining after 2009 when Gottschalks went bankrupt. Later departures included Ross Dress for Less and Bed Bath & Beyond. The latest blow came in January when Macy’s announced it was closing its location in the Arden-Arcade center.

“There gets to be a point when you lose enough of your anchors and tenants that you fall into a death spiral,” Brown said.

But like Sunrise, Country Club has new owners with plans to revitalize the mall.

While online commerce and shifts in spending habits pose a threat to brick-and-mortar retailers, the idea that all enclosed malls are dying might be overblown. Some industry research suggests up to 80 percent of the nation’s approximately 1,200 shopping malls are healthy.

Industry experts often classify “dying” malls as those with vacancy rates of at least 40 percent. Brown said a vacancy rate of 20 percent is a cause for concern. Sunrise is doing better at roughly 10 percent, based on the latest data from the CoStar Group.

Spinoso wouldn’t disclose the vacancy rate but said he’s confident in his company’s ability to “virtually eliminate all vacancies” at the center over time.

Kathilynn Carpenter, executive director of Sunrise MarketPlace, said the mall’s department stores are keeping up with similar locations nationwide. And the mall still has loyal shoppers and strong centers nearby, such as Marketplace at Birdcage and Citrus Town Center.

Seeking experiences

One likely strategy for the new owners of Sunrise is adding more “experience-oriented businesses” that focus on entertainment. Those types of businesses are especially important as retail centers attempt to compete with online merchants and attract millennials. Last year, Forbes cited study results suggesting 78 percent of millennials “would choose to spend money on an experience or event over buying something desirable.”

In recent years, Sunrise has attracted shoppers with experience-oriented offerings such as a farmers market, professional tennis matches and outdoor concerts in its parking lot. But the California Dream, the professional tennis team that played at Sunrise last summer, no longer exists. And the concerts, which were tied to the tennis stadium, haven’t happened since 2013. New tenants could fill the void.

Spinoso said he has already reached out to some entertainment and lifestyle tenants on a limited basis and has received a “very strong initial response” — although he did not mention specific retailers.

The mall will need more than a discount movie theater, Brown said. “That’s great for 13-year-olds,” he said. But “They don’t spend a lot of money.”

Brown said tenants that offer food, games and bowling could be a good fit. He cited Punch Bowl Social, Dave & Buster’s and Lucky Strike as examples.

He also suggested upgrading the food court, perhaps to a “food hall” with a farmers market atmosphere. Dining options inside the mall consist of chains such as Taco Bell, Pretzelmaker, Orange Julius and Chinese Gourmet Express.

In comparison, Arden Fair and Roseville’s Galleria feature a wider variety of restaurants, including locally owned eateries such as Krush Burger and the new Greko Grill & Cafe.

Despite obvious challenges, observers said the company seems headed in the right direction. “If I were them, I’d shoot for the moon,” Brown said. “I think that it is a salvageable mall.”