The cinder-block façade of a warehouse in downtown Los
Angeles betrays only one sign of what’s inside: a giant banner seeking
“carnies” for hire. Welcome to Two Bit Circus, a futuristic “micro amusement
park” set to open Sept. 5.
Inside, visitors will find digital amusement-park games
where they can pop virtual balloons or demolish virtual buildings, all with
real-life balls. In a “story room,” they can journey through a mine shaft to a
secret temple using a mix of real objects, screens and virtual reality. In an
interactive showroom, up to 100 guests can play trivia games or jot down
wine-tasting notes on screens at their tables while MCs host the action.
Elsewhere, a robot
bartender mixes cocktails from a giant wheel of liquor bottles.
Two Bit Circus co-founders Brent Bushnell and Eric Gradman
want to attract the type of clientele who might once have spent a day at the
mall. “There’s a huge appetite—particularly [among] millennials, but really
everybody—for new stuff to do in public,” Bushnell said. The company is
currently in talks “with all of the biggest mall developers in the U.S.” to
lease space for future locations, Bushnell said. The indoor park’s size
purposely matches a typical mall-tenant floorplate, he added.
Battered by online shopping and millennials’ changing
consumption habits, traditional malls are suffering. Retailers such as Sears
and Toys ‘R’ Us have shuttered hundreds of stores, and the
mall vacancy rate hit 8.6% in the second quarter of 2018, the highest
since 2012, according to data from real-estate research firm Reis Inc. Malls have resorted
to leasing space to offices, churches and gyms to
lure foot traffic.
But according to some retail experts and real-estate
developers, reports of the mall’s impending death have been exaggerated. Top
malls in desirable locations continue to attract tenants willing to pay high
rents. “There’s a myth out there that historical retail is dead or dying or
will die soon,” said Mikey Vu, a retail consultant with Bain & Co. “We just
don’t think that’s true.” While many Americans get their toilet paper and milk
delivered, they still want to gather in physical spaces and for meals and
entertainment. “Experiential”
has become a buzzword in real estate circles, as more shops have drawn
in visitors with experiences they can’t get online. “Mall tenancy has
changed,” said Alexander Goldfarb, a senior REIT analyst at the investment bank
Sandler O’Neill + Partners. “What hasn’t changed is the human desire to
socialize.”
A handful of developers, retailers and entertainment
producers like Two Bit Circus are betting that sprawling, immersive
destinations will be the anchor tenants of tomorrow, and potentially fill
millions of square feet of abandoned retail space.
Two Bit Circus’ Los Angeles warehouse provides a
38,000-square-foot permanent home for the interactive entertainment that
engineers Bushnell and Gradman have been developing since 2008. “Even then we
were pretty frustrated with the fact that people were home and on social media
and were on their phones and weren’t in public,” Bushnell said.
They began by designing elaborate party games, and
eventually picked up corporate clients—including Intel, now an investor—which
hired them to provide attractions at holiday parties, conferences and product
launches, Bushnell said. Since 2008, Two Bit Circus has raised $21 million, he
said, and last month announced an investment from CJ CGV , the Korean
movie-theater juggernaut. (Bushnell declined to disclose the amount; CJ CGV did
not respond to a request for comment.)
The company sees the park as a kind of movie theater of
tomorrow, offering rotating attractions to appeal to visitors’ desire for
novelty. Admission is free, and guests pay for games or time spent in different
rooms. (A spokesperson said a two-to-three-hour visit with food is expected to
cost $40 to $45, though pricing is not yet finalized.) Bushnell is, in part,
pitching the park as a way to drive foot traffic to malls and retail hubs.
Whether these kinds of destinations will attract guests and
make money remains to be seen, especially given the high building costs. “The
business model hasn’t been proven out,” Bain’s Vu said. “I don’t think anybody
knows how to do it extremely efficiently to generate profit margins.” These
venues may work in places like Las Vegas and Los Angeles, which have high
visitor turnover, but may be riskier in less populated areas, Vu said.
According to Goldfarb, a public mall developer that answers to shareholders
would have a hard time taking this kind of risk.
Two Bit Circus is not the first company to bring this kind
of experiential concept to a shopping center. Consider KidZania, a miniature
“city” where children can roleplay more than 100 occupations, which started in
Mexico City in 1999 and now has about two dozen locations worldwide, according
to its website. The company plans to open its first U.S. locations in 2019 in
malls in Frisco, Texas; Oakbrook, Ill.; and in the American
Dream retail and entertainment complex in East Rutherford, N.J.
In Las Vegas, a New York real-estate firm is designing an
entire mall around experiences. Fisher Brothers, along with Michael Beneville
of the creative agency Beneville Studios, is building a 200,000-square-foot
“immersive bazaar” of restaurants, shops and event space. Set to open in
October 2019, Area 15 will have a distinctive anchor tenant: Meow Wolf, the
Santa Fe, N.M.-based arts and entertainment group that creates narrative,
immersive art installations, which is leasing 50,000 square feet.
Additionally, Area 15 will have 32,000 square feet of
outdoor space for music festivals, drone races and other events. “Gone are the
days when you thought you could get away with Santa Claus at Christmas,” said
Winston Fisher, a partner at Fisher Brothers and CEO of Area 15.
“There’s a ripe opportunity for this thing to go big and
change the future of retail,” said John Feins, Meow Wolf’s vice president of
communications. (He wouldn’t share specific plans for Meow Wolf’s space for
fear of spoiling the experience for visitors.)
Meow Wolf is the only confirmed tenant at Area 15, but
Fisher Brothers is in talks with breweries, an axe-throwing venue and a
virtual-reality company, Fisher said. Starting in 2020, the developer hopes to
open two similar malls per year for the next three years.
Meow Wolf’s Feins has seen firsthand how oddball
experiential businesses can work. When the company’s “mystery house” experience
opened in March 2016 in Santa Fe, the group needed 125,000 annual visitors to
break even. Some 400,000 people came in the first year, and 500,000 the year
after that, Feins said. The public’s desire for in-person experiences is alive
and well, despite—or maybe because of—the digital creep in our lives. “We all
thought that malls are dead,” Feins said. “But wait a minute, what if just the
way it’s being done is what’s been outgrown?
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