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  • Step into the shopping center of the future.

  • A world filled with exciting ideas.

  • Since they started popping up in the 1950s,

  • malls have been the quintessential

  • American shopping experience.

  • Bustling temples dedicated to the wonders

  • and excesses of retail, food service and entertainment,

  • the rise of the mall coincided

  • with the growth of the suburbs.

  • The heyday of the malls really is the 1970s,

  • sometimes referred to as the malling of America.

  • They really thrived at providing

  • some sort of public gathering space,

  • some sort of social life,

  • in addition to actually giving people places to shop.

  • Over the past few decades before then,

  • lots of developers were building malls,

  • and it kind of coincided with the growth of highways.

  • So as more people started traveling

  • and interstate started being built,

  • developers really wanted to put something

  • to attract people to stop.

  • Take a look

  • at an average American mall today however,

  • and you'll see a very different picture.

  • Closed stores and empty hallways

  • became the norm in many malls

  • even before COVID-19 delivered them

  • another set of problems in 2020.

  • So what happened?

  • This is the story of the rise and fall of American malls.

  • When malls worked best, they survived and thrived

  • thanks to their anchor stores.

  • Those are the stores

  • that are on the edges of the malls

  • and that are outward facing to the parking lot.

  • So if you're a shopper,

  • you're gonna walk through one of these big,

  • usually a department store.

  • So if you're thinking about Macy's or Sears or JCPenney,

  • those are called the anchor stores.

  • So once shoppers are done shopping there

  • maybe they wander to the middle part of the mall,

  • shopping at the other apparel shops

  • or even going to buy some food.

  • But you really had to have a reason

  • for people to shop in the first place.

  • Because anchor is bringing all those people,

  • they tend to pay very little rent.

  • Around 80% of income from all owners

  • come from the inline stores inside the mall.

  • Over the past few decades,

  • malls have been facing challenges from all sides.

  • The first being, there's just too many of them.

  • As early as in the 90s,

  • the malls were beginning to compete with each other.

  • We have a lot more

  • retail square footage per capita than Canada.

  • We have only seven times

  • more retail square footage per capita than Europe.

  • After the 2008 financial crisis

  • lowered retail spending across the board,

  • malls and especially their department stores

  • also had to contend

  • with a new challenge that was growing fast.

  • Malls started to suffer in the early 2000s

  • with the rise of online shopping.

  • Suddenly they didn't have that captive audience

  • who had to go to the mall to buy something.

  • You didn't have to get up,

  • get in your car drive all the way to the mall

  • and then see a bunch of other people.

  • You can just do it from the comfort of your home.

  • Department stores overall

  • have become less relevant over the years.

  • Many have fallen totally off

  • and that's Sears, JCPenney.

  • Several bankruptcies in this space

  • have really hurt the industry.

  • But as department stores goes

  • so does the mall oftentimes.

  • So if department stores start closing locations

  • that means they're usually leaving malls.

  • This is the Greenbrier mall in Southwest Atlanta, Georgia.

  • It's in many ways emblematic

  • of the problems facing malls today.

  • It's been there since 1965.

  • So for more than half of a century

  • it's been serving this area of Atlanta

  • that's predominantly black

  • and also as middle-class neighborhood.

  • It started with anchor stores that were department stores.

  • So you had JCPenney and then Riches

  • which was later bought by Macy's.

  • So you had these two national chains.

  • It had the first Chick-Fil-A in a mall

  • like that type of format.

  • So when you think about the history of malls

  • like Greenbrier had like the perfect template

  • but now Macy's will be exiting the mall

  • meaning that the mall will be left without an anchor

  • which is vital to attracting other shoppers

  • to come into the stores.

  • Greenbrier then because it's kind of an example

  • or a test for all these other middling malls across America

  • about what do you do when these large department stores

  • as a business decision on their end

  • are trying to just stay in the high quality malls,

  • how does a middling mall survive?

  • What's their next strategy?

  • Greenbrier is a textbook example

  • of how closely the deterioration

  • of the middle class in the US

  • is tied to the health of its malls.

  • The median income for the surrounding area

  • has reduced by $6,905 over the past 15 years

  • to a total of $20,756 per year.

  • And yet residents and store owners hope that Greenbrier Mall

  • will see better days.

  • Malls are made up of the people

  • and communities that help fuel them.

  • Greenbrier is still a place that people go to and cherish

  • even if on paper it doesn't have the elements

  • that make it a thriving mall.

  • Well, a lot of the existing constituents

  • and residents there feel in many respects

  • that they worked hard their whole lives

  • to be able to experience the American dream

  • The single family, suburban house in a leafy yard

  • near a big mall that had a great Macy's.

  • They're very reluctant to see that taken away from them.

  • Now that Macy's has gone,

  • Greenbriar may try to take inspiration from what many malls

  • were doing in the years following the financial crisis

  • focusing not on shopping but experiences.

  • That was a trend we were seeing

  • in 2016 up into the pandemic pretty much.

  • And by experiences

  • I mean everything as traumatic as a waterpark

  • or hosting like concerts to have people wanna come

  • other than just to buy stuff.

  • Having Instagrammable moments,

  • making sure your store is pretty

  • that people wanna take a photo

  • and post it on Instagram or Twitter.

  • Historically the mall has always been a place for teenagers.

  • You like to hang out, see your friends

  • and also kind of be seen at the mall.

  • And that hasn't completely changed.

  • Like before the pandemic, about 95% of gen Zs,

  • so today's teenagers had gone to a mall

  • in a three month period.

  • So teenagers are still going to the mall

  • and they've always been key to having thriving malls

  • because they're coming into their spending power.

  • And once you went over teens

  • hopefully you're really winning

  • over a loyal customer for life.

  • But thanks to lock downs across the country,

  • most malls at one point or another were shuttered in 2020.

  • That means no one using the multi-billion dollar

  • American Dream malls indoor ski slope, no one going

  • to the King of Prussia Mall's indoor skydiving attraction.

  • Basically the pandemic gave malls

  • what they didn't need.

  • Another problem.

  • What would your net income

  • or net operating income

  • have been in 2022 without COVID

  • and what is it now in a post COVID world?

  • So, our view is it was a roughly 10% hit

  • to net income over that period.

  • That's Vince Tibone from the analytics

  • from Green Street Advisors, which rates American models

  • from A to D just like a report card.

  • And if malls did have a report card,

  • they wouldn't exactly make honor roll.

  • Here in the US, out of 1000 malls in the country,

  • there are roughly 250 malls we grade A- or better.

  • The B and C quality malls

  • which is the vast majority of the malls by count

  • we think are on a negative trajectory.

  • And it's gonna depend on

  • a lot of the local dynamics ownership decisions

  • around how much money do you invest in the property

  • will determine whether this mall

  • can survive as retail or rapidly melting ice cube.

  • While there have been a few bankruptcies

  • among real estate investment trusts

  • that own mostly B to D malls in the past few years,

  • A models really are doing just fine.

  • Some of the most productive shopping centers

  • in the country are super high end.

  • So I'm talking about Bal Harbor Shops

  • down in Miami, Florida,

  • there is Americana Manhasset in Long Islands, Gold Coast,

  • the Grove in Los Angeles.

  • These are places that have all high end stores

  • and have done quite well.

  • A lot of that has to do with efficiency of their property.

  • So their sales per square foot are really high

  • but also they've invested a lot in their actual mall

  • 'cause it has to look beautiful,

  • it has to have all the services

  • that a wealthy shopper expects.

  • So what will the future hold

  • for less sought after malls

  • that can't revive their golden years?

  • For many of these malls, it will mean closure

  • and then hopefully conversion.

  • If they can't get a new use to come in,

  • it's expensive but you can just demolish it.

  • And there are still quite a lot of sites

  • just sitting waiting.

  • Amazon has been picking up more and more of those

  • building their big fulfillment centers.

  • Also, a lot of communities see this as an opportunity

  • to redevelop, reinhabit this dead mall

  • to help that community meet the challenges

  • it was never originally designed for.

  • The number one reuse of an existing mall is as workspace.

  • It's actually pretty easy to just throw some carpeting down,

  • cut a few more windows

  • and turn it into office space.

  • Sort of number two reuse of malls

  • is either medical, healthcare or education.

  • Lots of great examples of community colleges

  • all the way down to elementary schools moving into malls.

  • And then the third strategy that I wish happened more

  • is actually just demolishing them all and regreening.

  • Either reconstructing the wetlands that used to be there

  • And that frankly we never should have built on

  • in the first place

  • or providing community parks and gardens.

  • While most analysts say post pandemic retail shopping

  • could bring some life back into the American mall,

  • many are not long for this world.

  • Depending on where you live,

  • It might be time to make one last visit,

  • grab some food, do some shopping and say farewell.

Step into the shopping center of the future.

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B2 US mall shopping macy retail anchor department

The Rise and Fall of American Malls

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    joey joey posted on 2021/04/26
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