Based on property records, the majority of mall space has traditionally been held by department stores (48.7% of leasable area) and apparel (29.4% of leasable area). In a report from CBRE, the reported retail-sales growth from these sectors was low from 2011-2016.
In contrast, categories with stronger retail-sales growth still account for relatively little occupancy of U.S. malls. This includes many of the smaller area occupants of malls. Restaurants (4.6% of leasable area), Sporting goods (3.1%) and home furnishings (1.6%) and health/personal care (1.2%) all offered much more individual growth than the larger area occupants.
The mall itself is not dead – the issue that malls face in continuing is their ability to update to the modern shoppers wants and needs. The old mall model is falling by the wayside, and converting the tenant base of malls is proving to be a long and arduous task. Though difficult, malls do need to make the effort to transition or else run the risk of complete failure in the new American retail world.
A large challenge in the changes in mall retailers over time is the inability to create new tenants or overturn tenants who have inconsistent sales. Because most retailer leases in malls often span a decade or more, those pacts are challenging to change or end early – especially without a retailers consent. Another barrier to change is the hold that department stores have over the malls in general. Department store chains often hold veto power for significant changes proposed to a malls space. But as retailers continue to struggle, they do seem more amenable to efforts to reposition the malls that house them for success.
Mall owners that are likely to find success will be investing capital into creating an experience for shoppers. Studying consumer preferences will help determine what strategy needs to be taken for the future success of individual malls. Many may take the approach of introducing trendy new retailers or redeveloping the mall layout, while others still will choose demolition.
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