Kids' activity centres to make malls Amazon-proof

A US mall operator is buying back stores to convert into spaces for KidZania

Sandeep Mathrani, head of US shopping-centre operator General Growth Properties Inc, was in Dubai when he saw something that startled him: An indoor city just for kids.

In the middle of the giant Dubai Mall, he found an activity centre filled with child-sized restaurants, bakeries, hospitals and police stations. The kids operated their own role-playing town — complete with currency — and parents were nowhere to be found.

Mathrani took to the concept, called KidZania, and is now working to bring it to America. General Growth Properties will open the activity centres in Dallas and Chicago over the next two years, marking the US debut of a business that has staked out locations in 24 cities overseas.

At a time when US malls are facing hundreds of store closings, they’re looking to fill their space with more diverse tenants — everything from urgent-care centres and supermarkets to climbing gyms. KidZania can sop up square footage vacated by department stores and has the added bonus of being immune to e-commerce.

“The country is over-retailed,” Mathrani said in an interview. “The biggest advantage we can have is to recapture department stores and repurpose them.”

General Growth Properties, which owns 126 retail centres in 40 states, has gone on the offensive in converting department stores into other facilities. Instead of just waiting for stores to go vacant, it has bought out leases and physical property from chains like Macy’s Inc, Sears Holdings Corp and J C Penney Co. The company has now reclaimed more than 100 stores over the past five years, Mathrani said.

The KidZania business, founded in 1999 by Mexican entrepreneur Xavier Lopez Ancona, requires a lot of space to operate: 60,000 square feet (5,600 square metres), with 30-foot-high ceilings. The activity centres also are best suited to suburban areas with families and schools, said Keith Rubenstein, who runs KidZania’s recently created US division.

For Mathrani, KidZania is part of a shift toward “experiential retail” —and away from department stores. Over the past six years, General Growth Properties’ roster of department stores has dropped from 500 to 398. And the number could fall below 300 in the next five years if the company continues proactively acquiring stores, he said.

Other concepts have taken their place, including supermarkets like Wegmans Food Markets Inc, entertainment hub Dave & Busters Entertainment Inc, and a growing number of bowling alleys and fitness centres.

Each KidZania “city” allows children aged 4 to 14 to role-play in more than 100 occupations and professions, such as doctor, reporter or truck driver. The centres come with buildings, paved streets, cars and their own currency called “kidZos”. To make the experience as authentic as possible, companies sponsor local landmarks and businesses. Kids may fly a British Airways plane, for example, or operate an H&M store.

© Bloomberg