The Decline of American Malls: What Went Wrong?

The Rise and Fall of American Malls

• Malls have been a significant part of American shopping experience since the 1950s, providing a social gathering space as well as retail, food service, and entertainment.

• The heyday of malls was in the 1970s, known as the 'mauling of America', when they thrived as public gathering spaces and attractions for shoppers.

• The growth of malls coincided with the development of highways, as developers sought to attract travelers to stop and shop.

• The decline of American malls is evident today, with many experiencing closed stores and empty hallways even before the COVID-19 pandemic.

• Anchor stores played a key role in the success of malls, attracting shoppers and paying minimal rent for their space, thus contributing to the survival and thriving of the entire mall.

The Rise and Fall of American Malls

Challenges Faced by Malls

• Around 80% of income for mall owners come from the inline stores inside the mall.

• Malls have been facing challenges such as excessive competition, especially since the 90s when they began to compete with each other and the retail square footage per capita in the US became almost seven times more than in Europe.

• After the 2008 financial crisis, malls and their department stores faced reduced retail spending across the board, further exacerbating their challenges.

• The rise of online shopping in the early 2000s posed a significant threat to malls as it meant they no longer had a captive audience who had to physically visit for shopping.

• Department stores, once anchor tenants of malls, have become less relevant over the years, with several big names like Sears and JCPenney facing bankruptcies, which also impacted the malls where they were located.

Challenges Faced by Malls

The Future of Greenbriar Mall

• Greenbrier Mall is facing the challenge of losing its anchor store, Macy's, which is crucial for attracting shoppers to the mall.

• The decline of Greenbriar Mall reflects the broader economic issue of the shrinking middle class in the US, as the median income in the area has decreased significantly over the past 15 years.

• Despite the economic challenges, Greenbriar Mall remains meaningful to the local community, as it represents the American dream for many residents and store owners.

• In response to Macy's departure, the mall may explore the trend of focusing on providing experiences rather than just shopping, such as hosting events and creating Instagram-worthy spots to attract visitors.

The Future of Greenbriar Mall

The Impact of Pandemic on American Malls

• Before the pandemic, about 95 percent of Gen Z teenagers visited malls within a three-month period, making them a crucial demographic for thriving malls.

• However, due to lockdowns in 2020, most malls were forced to shut down, leading to significant financial impacts.

• An analytics firm, Green Street Advisors, estimated a roughly 10 percent hit to net income for malls in the post-COVID world.

• Out of the thousand malls in the US, only roughly 250 malls are graded A- or better, while the majority are on a negative trajectory, with the future depending on local dynamics and ownership decisions.

• The pandemic also exposed the financial vulnerability of B to D grade malls, leading to bankruptcies among real estate investment trusts that own them.

The Impact of Pandemic on American Malls

The Future of American Malls

• High-end shopping centers in the country, such as Bal Harbour Shops in Miami, Americana Manhasset in Long Island, and The Grove in Los Angeles, have thrived due to their efficient property and upscale offerings.

• Less sought-after malls may face closure if they can't attract new business, leading to potential demolition or repurposing.

• Possible reuses for struggling malls include transforming them into workspaces, medical or educational facilities, or even demolishing them to create green spaces or rebuild wetlands.

• Post-pandemic, retail shopping could revitalize some American malls, but many are still at risk of closure depending on their location.

The Future of American Malls

Conclusion:

The future of American malls remains uncertain, with some thriving and others at risk of closure. Understanding the historical significance, current challenges, and potential transformations is crucial in navigating the evolving landscape of American retail.