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The demise of America’s shopping malls

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What was once the home of Mallrats has been replaced with deadmalls.com . Once-vibrant shopping malls are slowly being killed across the country, but the obvious culprit - online retail - may be only partly to blame. 

Without an Anchor

Anchor stores like Sears, Macy’s and J.C. Penney used to be big traffic drivers but now, many stores are closing their doors with even more planned for the future. Without an anchor, analysts say it’s just a matter of time until the rest of the mall suffers the same fate. In fact, Green Street Advisors which tracks the mall industry predicts 15% of U.S. malls will fail or be converted into non-retail space within the next ten years. Within 20 years, half of America’s shopping malls could be closed. 

Perhaps an indication of the widening of income inequality in the US, the problem only lies with middle to working class malls. Data shows the 400 malls that cater to upper-income shoppers are actually seeing improved business. Shopping centers with anchors like Saks Fifth Avenue and Neiman Marcus are expected to survive.

Changing Shopping Habits

While online retail certainly is taking a bite out of brick and mortar store sales, stats show that only 6% of revenue is lost to online sales. Instead, some experts say the demise of the shopping mall is more a matter of too many stores, the result of a long retail boom. “We are extremely over-retailed,” said Christopher Zahas, a real estate economist and urban planner in Portland, Oregon to the New York Times. “Filling a million square feet is a tall order.”

Shopping culture follows housing culture. The megamall was most popular when Americans with cars and fat wallets moved from the city to the suburbs. At one point in the 1980s, a few hundred malls were being built each year. There were 1500 malls constructed from 1956 to 2005, but not a single new one has been built since 2006. All of that construction left a lot of overstock. Now that the shift is toward city centers, city dwellers don’t want to travel to the suburbs to shop.  

Transforming Ghost Malls

So, what will happen to all of the shuttered malls? Unfortunately, the process of knocking down or converting a mall is not an easy or quick one. Don Wood, the CEO of Federal Realty Investment Trust that owns 85 shopping centers says it can take as long as two decades. 

“It’s really going to be hard in the next 10 years to knock down that mall and rebuild it into something better because the economics just don’t work," Wood said at a conference in June 2012, according to The Wall Street Journal. A failing mall in a non-affluent market "most likely will just stay there and get worse and worse over the next 20 years."

Some malls can be transformed into “power centers” with big-box stores like Costco, Best Buy and Target. Others are seeing a whole new life as community colleges and even megachurches like the Lakeland Mall in Florida. Others have been redeveloped as housing, office space, storage facilities, bowling alleys and even green space. 

 

 


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