NewsWire: 11/5/2020
- The recent wave of retail bankruptcies is pushing mid-range malls to the brink. Already on shaky ground before the pandemic, they’re facing even more vacancies as consumers shop online and take their business to bigger malls. (Bloomberg)
- NH: Malls have been inching towards extinction for years. Covid-19 has simply accelerated their demise. Coresight Research predicts that 25% of American malls will close within the next five years.
- But not all malls are being affected equally. Malls in the US are rated on an A through D scale, with A being those generating the most sales revenue per square foot and D being those generating the least. While A-rated malls are expected to survive, the almost 700 B through D malls can’t fill shop vacancies nor compete with the rise in e-commerce.
- Since March, hundreds of department stores have closed. Over 25 major retailers have declared bankruptcy in 2020, including J.C. Penny, Brooks Brothers, and J. Crew. Now, over two-thirds of B-rated malls have an anchor store vacancy, and almost one-third have two or more vacancies. (See charts below.) Typically, when one shop goes empty, more stores tend to leave.
- Before the pandemic, the most successful malls catered to an older (Silent and Boomer) consumer. These malls were more upscale and offered a tourist-like experience. But with Covid-19 being most dangerous for older people, this age group is staying home and shopping online. A RAND Corporation poll found that only 27% of those ages 55+ shopped online every week before the pandemic. That has risen to 34% since the pandemic started.
- We've been writing about hopeful plans to revive malls ever since the Great Recession. (See “A Mall Built for Entertainment Rather Than Shopping?"; "Mall Landlords Double Down on Renovations"; "Could Teens Save the US Shopping Mall?") I have always been skeptical about mixing roller coasters and retail. But I have been more optimistic about shifting malls away from consumer goods entirely and towards more "experiential" services--like bars, gyms, clinics, bowling allies, and spas. Also, turning malls into public squares with a civic dimension (social services, volunteering, ministry) would match the Millennial focus on community and engagement.
- All of these longer-term solutions, of course, can't possibly work until the pandemic is over. While it rages, there's no way make congregating indoors appealing to generation that carefully assesses and manages personal risk. For the time being, malls just have to try to hold on.
