Eating at the top of the retail food chain
I have a theory. If you watch a lot of TV on a real TV, you probably spend a lot of time in malls, too.
Why do I think that? There are a few reasons. It’s probably older, which is why you don’t watch your video entertainment on your phone, or just use your TV as a conveniently big screen to stream your Netflix show of choice via Chromecast, Fire Stick, or Roku.
Being older, you also probably haven’t migrated as much of your commerce to the online world as millennials and “post-millennials” (in other words, teens) have. However, you are most likely catching up quickly in this area.
Finally, while this correlation isn’t as close as the others, being older means you probably have more disposable income than young people who must pay off student loans in the lower reaches of the career ladder. All of these factors make it an ideal candidate for spending time in so-called “A++” malls.
The A++ rating comes from Green Street Advisors, a real estate research firm, and only three dozen shopping centers achieve the rating nationwide. (1) These malls include some of my favorites, like Lenox Square Mall in Atlanta and Westfield Century City Mall in Los Angeles. The Westchester, a New York county-located mall of the same name, is also a likely member of the mostly private list, based on its strong sales performance.
You don’t go to places like these to save a few bucks on a new pair of shoes, any more than you go to the local multiplex to secure the best possible movie deal. These are destinations. You go because you can do some things you enjoy, or maybe things you can tolerate while your partner enjoys them, in a relatively nice environment.
The fork in the mall economy mirrors the fork in the real economy. A small part of the population with a lot of disposable income can afford to spend a part of that income on pleasure. A much larger group, which needs to stretch their dollars as far as possible, has an expanding and much more efficient set of options for searching for value on the Internet. And when saving money is a priority, wealthy people can and do use those options too.
Unlike some, I don’t think this fork is necessarily a bad thing. For most homes, it’s important to get the most out of every dollar. Not having to pay the overhead that comes with even a decently maintained mall provides significant savings, not to mention the convenience of expanded inventory and home delivery. That’s why the total number of malls in this country is shrinking, even as the select few at the top are getting renovations and expansion.
However, whether or not the economic fork is good, it provides a clear explanation of what is happening to American malls. Conventional wisdom holds that malls are dying, and for lower-tier malls, that perception holds true. Green Street Advisors estimates that about 15 percent of existing malls in the US will close in the next decade. (2) And new malls are rare; only six have opened since 2006. (1)
It is an open question how these old dead and dying malls will be reused in the future. Since many of them occupy high-traffic locations near major transit arteries, they may one day become good workspaces, hotels, convention centers, or mixed-use projects that include residential developments. We’ll have to wait and see.
On the contrary, the owners of the most successful malls have not hesitated to spend large sums of money in order to stay fashionable. Westfield Corporation is giving Century City an $800 million facelift. Simon Property Group, the country’s biggest shopping center owner by market capitalization, has said it plans to redevelop or expand 29 of its properties here and in Europe. Such optimism is not without foundation either. Simon’s share prices hit an all-time high last October, Bloomberg reported. (1)
The surviving high-end malls are likely to look much more like the urban centers of today, just as old malls mirrored the city centers of yesteryear. City centers were once primarily shopping destinations, until shoppers turned to suburban malls. Today’s city centers have been largely revitalized as entertainment and dining destinations, often geared toward those with the ability and inclination to spend on high-end experiences. Based on the trajectory of existing upscale malls, those that survive are likely to evolve in the same way, focusing on high-end retail alongside popular chain restaurants, high-end amenities like lounges, and entertainment options like the latest technology. art movie theaters.
The malls of 25 years ago, a collection of stores geared largely to middle-class shoppers anchored by a department store like JC Penny or Sears, are disappearing. But if you want a place to go to drive the latest me-gadget, where you can then walk a few steps to order a mochaccino, there’s probably going to be a mall for you for quite some time.
Sources:
1) Bloomberg, “These Malls Didn’t Get the Memo That They Are Dying”
2) The Wall Street Journal, “Exclusive mall owners pay to stay stylish”
