A lot of malls are watching foot traffic as they are losing tenants as consumers make purchases online. Clicks verses bricks has been the headline concern for retail properties, as malls convert to entertainment centers and food courts transform into fine dining and theaters.
Anchor department stores such as Macy’s and Sears, and fashion retailers such as Payless, BCBG and The Limited, continue to downsize or file for bankruptcy. And approximately 25 percent of U.S. shopping malls will most likely shut their doors within the next five years, according to Credit Suisse. The bank estimated that roughly 220 to 275 shopping centers (or between 20 percent to 25 percent of the nation’s 1,100 shopping malls) would close by 2022.
Class A malls are doing fine due to catering to the affluent communities they serve. According to a 2017 report from Green Street Advisors, high-productivity malls have doubled in value since the recession. But what about the class B and class C malls that are struggling? Approximately 36 to 37 million square feet of retail space could be returned to the market by next year, according to JLL Research, based on store closure announcements.
Some malls are repositioning into apartment complexes, churches, schools, and wellness and medical facilities. In Providence, Rhode Island’s Arcade Providence, the oldest shopping mall in America, converted old retail space into affordable microapartments. And other malls have become office space. In 2016, Google bought the Mayfield Mall, the oldest indoor mall in Northern California, which it uses as a satellite campus. And Rackspace, a web hosting company, turned San Antonio’s Windsor Park mall into its headquarters.
Meanwhile, there are not enough warehouses for the growing ecommerce. Fitch Ratings analysts reported retailers who are looking to increase the speed of their delivery should repurpose mall space into industrial distribution centers.
A proposed $177 million Amazon fulfillment center in Cleveland at the former Randall Park Mall site will take up 69 acres.
In April 2016 the site of the Dallas area’s first shopping mall is now a warehouse for packing shipments for FedEx. Big Town mall was demolished in 2006 and the property rezoned for industrial construction. Demolishing the mall for the location is an expensive option.
Shopping centers and malls that are located in areas with higher per-capita income and population density could be more easily repositioned with additional delivery and pickup amenities, said Fitch Ratings. In denser areas where land is scarce, retailers who are focused on speed of delivery are considering warehouse space in former shopping malls already located near residential communities.
This year, about one of every three brick-and-click, omnichannel retailers will have adopted a ship-from-store program, according to Forrester Research. Target is reportedly shipping from about 1,000 of its stores.
