The Death of the Indoor Shopping Mall

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The death of indoor shopping malls has been coming for a decade or more.  Twenty years ago, the shopping mall was the place to go for shopping, dining, and entertainment.  The pandemic has accelerated the end. According to a recent analysis by Green Street Advisors, 50% of malls could close by the end of 2021.  The closing of these malls could be devastating to the communities they currently serve.  A large indoor shopping mall provides hundreds of jobs and pays taxes into the city.

The decline in brick and mortar retail was not the case in the DFW area a year ago. Retail vacancies were at an all-time low of 5.5% as we discussed in this article from April of 2019.

The Battle with E-commerce

Retail shopping at brick and mortar stores had been in decline long before COVID.  Online shopping was winning the battle with the indoor mall.  Now, with fears of job loss, the uncertainty of job futures, and the need to stay home to be safe, many large retailers are closing locations.  Recently many traditional anchor chains have closed their doors, causing a ripple effect.  The resulting loss of foot traffic gives the remaining tenants in the mall a reason to break their lease or ask for a reduction in their rent. 

Anchor Stores

As anchors closed, malls were turning to entertainment venues to draw traffic.  Dine-in movie theaters, adult arcades, bowling alleys were in the plans to re-imagine the big-box spaces.  But, since the pandemic began, CMX has filed bankruptcy, and AMC has warned it may not survive the crisis.  Theaters in malls will be expensive to re-tenant with their sloped floors.  Experts do believe that entertainment will come back post-pandemic.  Any experiential venue that is hard to replicate online.  The question is whether or not mall owners can hold on until the recovery occurs.  

photo courtesy of Felix Moone – Unsplash

Apparel stores take up nearly half the space in malls, and they are the most troubled sector of the retail industry.  Simon Properties sued Gap for $66 million in missed rent.  J.Crew filed bankruptcy, as did Brooks Brothers. In September, Forever 21 filed as well. In pre-pandemic times, mall owners could handle a few failing retail tenants. They had time to fill the vacant spaces. Now, the landslide is coming faster than many owners can keep up with.

Department Stores Dying
photo courtesy of Alexander Kovacs – Unsplash

Restaurants Are the Mainstay

Restaurants have been a mainstay for malls to drive traffic.  Since the pandemic, Year-to-date restaurant sales were down 17% in May compared to the same timeframe in 2019, according to Green Street Advisors.  As e-commerce took more and more market share from brick-and-mortar retailers, mall owners began looking for tenants that couldn’t be replaced by the internet. Restaurant rows are the norm at most U.S. malls, and chains with massive footprints like Cheesecake Factory and Brio Tuscan Grille began eating up retail space.

In the long term, food and beverage concepts are still winners for malls, Vince Tibone of Green Street Advisors said. But those concepts are in for a short-term struggle.

“If our pretty bearish forecast plays out, this would be the painful transition period many malls needed to hopefully return to growth,” Tibone said.

“There are going to be malls that become obsolete because they don’t have the right owner or access to capital to get through this crisis.” Greg Maloney, CEO JLL told a reporter for Biz Journals.

We are curious what your thoughts are? Do you believe we are looking at the death of the indoor shopping mall?

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