In the 1950s when they were originally constructed, through the early 2000s, shopping malls were the backbone of retail shopping — bringing consumers with convenient parking and a broad choice of stores in one location. With the development of online shopping and changes in customer tastes, shopping malls have lost their allure. 2017 may be a critical turning point in their own survival.
Fung Global Retail & Technology, a research company that tracks retail store openings and closings, reported as of May 2017 statements of shop closures in the USA increased by 97 percent over this past year, to 3,296 locations.
Presently there are approximately 1,100 malls in the U.S. Bank Credit Suisse expects 20 percent to 25 percent of these — or about 220 to 275 shopping centers — to close down within the next five years because of all of the shop closures happening this season.
Large store chains like Macy’s, J.C. Penney, and Sears which are anchors at many malls are closing hundreds of stores. It’s often tough to replace them since they occupy places at mall entrances which are frequently at least 100,000 square feet. When anchor shops close and aren’t replaced, mall visitors to other shops decreases substantially because the anchor stores are what draw shoppers.
Normally it takes a few years for a mall to close. Generally malls may survive with a few empty shops but as leases expire for the nutritious stores, they shut as well due to declining foot traffic.
Thousands of Shop Closures
Sears, which owns Kmart, announced another round of store closings in June and in March said that it doubts it can survive. Macy’s is shutting 68 more stores this year following closing many shops last year and J.C. Penney is closing an additional 138 stores by July. Women’s apparel retailer Bebe is shutting all 170 of its stores and will change to internet sales exclusively.
Another women’s clothing vendor, Rue 21, declared 400 store closings. Footwear chain Payless declared the closure of 408 shops, provided it could get out of current leases. Lately, the Limited shuttered all its 250 stores. Sports Authority closed all of its stores and filed for bankruptcy this past year.
Ascena Retail Group, which owns Ann Taylor, Dress Barn, Loft, Lane Bryant, Justice, Maurices, and Catherines, just announced plans to shut between 250 and 650 locations during the next couple of decades. Children’s clothing retailer Gymboree, which has 1,300 places, announced it is filing for bankruptcy with the intent to restructure. The business was advised to close 375 stores.
According to real estate consulting and management firm JLL, department store closures this year will lead to around 37 million square feet of newly vacant mall area. In addition, even brick-and-mortar retailers which are financially healthy are taking precautions, requesting lease renewals of a couple of decades instead of the customary five to nine decades. Like Bebe, the women’s retailer, some retailers are departing the brick-and-mortar industry altogether and trying to change into an all-online model.
Too Much Retail Capacity
The USA has 23.5 square feet of retail space per capita, a lot more than any other nation. Canada with 16.4 square feet and Australia with 11.1 square feet would be the runners up, according to Morningstar Credit Ratings.
Twenty years ago teen-agers spent their evenings drifting local malls with their buddies. Today they’re happy to shop online, sharing their purchases with friends via pictures on social networking. Working girls save time by shopping online for everything from clothes to furniture. The”shop until you drop” mentality that appreciated a large choice of shops in one place is gone.
What Happens to Closed Malls?
Most closed malls sit vacant for many years as operators attempt to locate another use. However, as soon as they become a magnet for vandalism and other crimes, they are generally demolished. Deadmalls.com chronicles the decline of the wonderful American tradition.
Sometimes the building can be stored and dedicated to other uses. As an example, Eastmont Town Center at Oakland, California closed several years back. The town needed to preserve the structure and began leasing a part of it for government agencies. The mall currently houses a substation of the Oakland Police Department, a branch of the Oakland Public Library, a Social Security office, and an Alameda County Medical Center. While these government offices provide necessary services, not one of them creates any revenue tax revenue.
Can In-store Shopping Have a Future?
While enclosed malls might become extinct, consumers will probably continue shopping at physical stores, particularly open-air configurations and smaller components. Across the nation, many mails which were demolished are currently being replaced with mixed-use developments. But this often requires zoning changes.
Developments that combine retail, office, and residential do well. Food offerings are more upscale than what malls supply and there’s an emphasis on healthier cuisine. Specialty stores as opposed to large department stores comprise the majority of the retail area. Having homes in proximity to the retail element provides a stable and steady flow of customers.
The standard shopping malls that do survive will likely be people who have high-end shops and appeal to upper income customers. Malls are ranked by sales per square foot and, with that metric, there are approximately 205″A” level malls in the United States that most likely will flourish. By comparison, 334″C” and”D” level malls are at elevated risk of closure, according to real estate research firm Green Street Advisors.