It is no secret that traditional shopping malls are facing a great deal of uncertainty. This is why a new study reveals that a record number of retail spaces could become vacant in the United States over the next 10 years.
According to a recent report by Green Street Advisors, 360 department stores have closed at shopping centers in the past two years. By 2025, Green Street estimates that half of all remaining mall-based department stores will close.
Shopping malls have suffered over the years because of the rise of online shopping. In fact, e-commerce sales account for 14% of total retail sales. Online shoppers expect frictionless transactions.
Another factor affecting the industry is the shift in consumer preferences. As the Great Recession hit, middle-class consumers turned to budget-friendly stores. These stores left many anchor spaces empty. Mall owners shifted their focus to other forms of retail, including entertainment and retailtainment. However, there are still hundreds of malls across the country.
The number of malls has declined from 2,500 in the 1980s to just over 700 today. Malls were once more homogenous and reflected suburbanites’ preferences. They were also places where families would go to interact.
During the 1980s, malls were placed in popular culture with films like Bill and Ted’s Excellent Adventure. They were also used as community centers. Market Square in Colonial Williamsburg, Virginia was designated by King George I as a tax-free shopping area. There were annual fairs, puppet shows, horse races, and cockfights.
Today, a digital-centric consumer expects personalized experiences. Retailers need to adjust their strategies to meet these expectations. For example, stores should be able to offer click-and-collect or ship-to-home services. Also, retailers should be able to provide conveniences such as curbside returns.
In addition to the digital-centric consumer, shopping centers are under threat from shrinking foot traffic. This is why operators are shifting to “cultural hubs” and retailtainment centers. To maintain profitability, shopping centers need to be more efficient.
Despite the threats, the industry is adapting. Westfield Santa Anita is a prime example. Its malls are designed to attract Millennials and provide opportunities for social interactions. Other major malls, such as Simon and J.C. Penney, are closing or redeveloping. Some are even adding park-like areas and event spaces.
While the future of shopping malls may be uncertain, the history of these centers is rich. If they can weather the storm, they might be able to bring back some of the memories their communities once had.
One of the best strategies for shopping centers is to focus on the local consumer’s buying habits. This can help determine the appropriate mix of tenants for each site. Alternatively, retailers can use big data to gather valuable customer insights.
While the decline in retail store sales is not yet a complete trend, shopping malls are facing some serious challenges. Many are experiencing vacancy rates, which have been the cause of concern for several years. A recent report from Moody’s Analytics estimated that vacancy rates in the first quarter of 2021 reached a record high of 11.4 percent.