Can the Stagnating Knoxville Center Mall Be Saved?

Owner Simon Property Group puts its fixer on the case of resuscitating this "distressed asset"

For those who perhaps still remember the mall off Interstate 640 as East Towne—that palatial new retail hub poised to eclipse West Town as the place to shop back in the 1980s—ambling through the vast halls of Knoxville Center, as it is now known, can be a rude jolt.

Walking in through the door at Mandarin Palace, which fronts on Mall Road, you're hemmed in on the left by monolithic slabs of black glass covering unused storefronts. Keep right and you'll round a corner to see a bungee-and-trampoline attraction for kids in the middle of the hall. Surrounding it are a handful of active retailers—like Yankee Candle, Hot Topic, Mattress Direct—but also at least three or four more empty stores.

And as you keep moving toward the anchor Sears at the end of that wing, it gets progressively worse. The occupancy seems to get sparser and sparser until, on at least one side of the hall, there is seemingly nothing but one long, empty storefront leading all the way up to the bright-lit maw of America's oldest major retailer.

And it's that way all over the mall. There are plenty of busy storefronts, to be sure, but far too many black windows, dropped gates, and empty rooms, plus other shops that are apparently still viable but seem to have curtailed their business hours due to a lack of regular traffic.

Knoxville Center is what's known in the industry as a "distressed asset"—so much so that in the last couple of years, its owner, Simon Property Group, the country's largest mall operator, had washed its hands and put the property up for sale.

But now Simon has apparently committed to making things work with Knoxville Center, taking it off the market and assigning an enthusiastic young distressed-asset specialist to tackle the full-time job of changing, rehabbing, and reversing whatever it is that makes a good mall go bad.

What those corrupting factors are, how to address them, and whether it's already too little and too late are still open questions.

In the meantime, new Simon Properties distressed-assets rep Justin Sterling talks a good game. He's made the rounds at various local civic meetings lately, including the May 20 convening of the Alice Bell/Spring Hill Neighborhood Association (ABSHNA), witnessed by six of nine City Council members and a couple of county commissioners as well.

Sterling couldn't speak to the press directly, according to Simon corporate policy. But he did hold forth at some length at the open meeting. "This is not the mall that Simon has abandoned," he said. "It's time to stop the bleeding, and I'm the paramedic."

He admitted, though, that a lot of details are still uncertain, not to say nebulous. "I don't even know what my budget is right now. It's not a blank check by any means.… What's our timeline? I asked them for a lot of time. We're in it for the long haul."

He did allow that the mall was currently hovering around 75 percent occupancy, and that a good interim goal would be to reach 80 to 85 percent.

Sterling alluded to many problems that have been identified as culprits in the mall's decline: a lack of signage on I-640; bottlenecks and other issues with local traffic; a citywide perception problem concerning the safety of East Knoxville, though the mall itself is located in a northeastern, suburban area. Many of these are issues that must be addressed through the action of businesses, residents, and perhaps even legislators acting in concert.

He also suggested some concrete steps the mall will take to "keep existing businesses happy while drawing in new ones," such as asking for shorter-term leases from new tenants and asking for less money up front. He discussed attracting "destination-oriented" attractions, creating a mixed-use development with educational, civic, and medical facilities in addition to traditional retail tenants.

Sterling's presentation was generally well received. But just as in the story about the blind men and the elephant, everyone seemed to walk away with a firm grasp of the part closest to them. Fourth District City Councilman Nick Della Volpe—the mall is in his district—listed signs and visibility issues as chief among his concerns for helping the mall.

"They're sitting in an artificial valley with hills made by TDOT [Tennessee Department of Transportation]," he says. "It's been more than 30 years now, and trees and shrubs have grown up." One of the possibilities discussed for that exit has been some kind of tailored tree trimming or brush removal.

What's more, the lack of visibility is compounded by a quirk in state law that prohibits signs from being erected on I-640 past the first exit. "If you're coming north from I-640, you see nothing but greenspace," Della Volpe says. "Unless you see the words ‘Mall Road' and make the connection, you don't know what's going on there.

"We need to give them some reasonable signage that says mall, gas, etc. I'm trying to work on that angle for them."

But Alice Bell resident Bob Wolfenbarger, a neighborhood activist of sorts, feels that many of those concerns are secondary to underlying problems that have been plaguing the mall for nearly two decades. An occasional critic of both local government and mall ownership, Wolfenbarger believes Knoxville Center is dying a slow death for want of attention—both from Simon, which he said hasn't made any significant improvements since expanding its West Town property to nearly double capacity in the early '90s, and from local lawmakers.

Among other concerns, he worries that the city's funding of an expansion of Washington Pike is merely serving the needs of developers who would build "a new commercial corridor, just like Clinton Highway … that would negatively impact the mall" by creating sprawl and detracting from it as a center of commerce.

And ABSNA President Ronnie Collins alluded to the eternal specter of danger and ill repute that seems to hang over East Knoxville, and how that may be affecting mall prospects. "I think perception is the number-one problem, not just the mall but the whole east end of town," he said. "There's such a negative perception of East Knoxville itself. Until that perception changes, it's really going to be an uphill battle."

But Wolfenbarger, whose wife works in retail—she spent the better part of a decade at Knoxville Center—said he has followed issues surrounding the industry through the years, and noted another issue that Knoxville Center will have to face down:

"Enclosed malls are no longer the chic places to shop," he said. "Now it's places like Turkey Creek, so-called lifestyle centers."

And the national media seems to bear him out. Going back to 2009, Newsweek magazine asked, "Is the American shopping mall dead?" That same year, The Week decried "The Vanishing Shopping Mall." And according to a more recent article in the Boston Business Journal, only two new major indoor shopping centers have opened since 2006.

And while there's evidence that mall culture was already in decline before the country's recent economic downturn, business woes seem to have fast-tracked that slide into some kind of cultural oblivion.

Which isn't what East Knoxville needs to hear, given the stakes. Della Volpe said the mall pays around $2.6 million in property tax every year, split between the city and county. And the city's share of the mall's sales-tax revenue is another $1.5 to $2 million.

"When a mall fails, it's like a nuclear weapon goes off in a community," Wolfenbarger said. "It causes a sense of decay and discouragement. You can go to any major city and there will be a failed mall somewhere, and eventually it costs tens of millions to try to repurpose them.

"Property values go down; crime goes up. It's devastating."

"I talked to managers at some of the other stores outside the mall," said Collins. "It's not a competition thing to them. If the mall folded up, everyone would suffer."

There is some hope. Sterling told the ABSHNA group that, "In my time, I've had some real distressed assets. … This is not at all the worst situation I've dealt with."

He said he has experienced some success, and received some recognition for his work in this field. "I'm the ninja of economic prosperity," he said in a moment of levity, generally winning the group over with a mix of good humor and infectious energy.

He may need all of that energy, and some help to boot.

"We need a comprehensive plan," Wolfenbarger said. "We need someone who doesn't have skin in the game to come down and look at the issues. There needs to be a strategy especially for Knoxville Center."