Indoor 'cities' for kids seen as a way to make shopping centres Amazon-proof

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

Mr Mathrani took to the concept, called KidZania, and is now working with the company 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 around the world.

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 metreage vacated by department stores and has the added bonus of being immune to e-commerce.

One of the many activities offered at Kidzania centres. Photo: KidZania

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

Acquiring Stores

General Growth Properties, which owns 126 retail centres in 40 US 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, Sears Holdings and J.C. Penney Co. The company has now reclaimed more than 100 stores over the past five years, Mr Mathrani said.

The KidZania business, founded in 1999 by Mexican entrepreneur Xavier Lopez Ancona, requires a lot of space to operate: 5600 square meters, with nine-metre 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.

‘Big Win’

Mr Mathrani already knew the concept when Mr Rubenstein approached him last year, once the company had secured a licence to operate in the US through its partner, E2W, Mr Rubenstein said.

“That was a big, big, big win,” Mr Rubenstein said. Mr Mathrani “was ready in advance, and it just so happened we had the right product to fill those needs at his centres.”

For Mr Mathrani, KidZania is part of a shift towards “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.

Bowling Alleys

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

Each KidZania “city” allows children ages 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.

Children role-playing at the KidZania London centre at its opening in 2015. Photo: Tim P. Whitby/Getty Images

Parents are free to drop off their children for a session, which lasts about four to five hours, or they can stay to watch from a deck that looks over the scene. A session typically costs from $30 to $50 per child, depending on the location. KidZania has locations in cities such as Tokyo and London, and each one draws about half a million visitors annually, the company says.

More Cities

The first US locations will go into Dallas’s Stonebriar Centre in 2018 and Chicago’s Oakbrook Center in 2019. The Dallas location will be built from the ground up, while the one in Chicago will occupy the upper level of an existing Sears store. Rubenstein expects to roll out 20 more US locations over the next decade.

The chain should have plenty of room to grow. The US has about 2.2 square metres of retail real estate per capita, according to data compiled by Clarion, which has about $US44 billion in real estate under management. By comparison, Canada has only 1.4 square metres per person.

More than 10 per cent of the nation’s retail space – or nearly 93 million square metres – may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group. That means malls will need new anchors, said Jeffrey Langbaum, an analyst with Bloomberg Intelligence.