The Evolution of Malls in the US: Adapting to a New Environment
New York
CNN
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Retail Experts Assess the State of Malls
Retail experts have long sounded the alarm on malls in the US.
But malls are not going extinct, they are merely adapting to a new environment. In fact, many have reported robust occupancy levels and bigger crowds than before the pandemic, according to a recent market analysis from Coresight Research.
Occupancy Rates and Revenue Growth
In a report published in June, Coresight found foot traffic in top-tier malls was up by 12% in 2022 compared to 2019, while traffic in lower-tier malls was up 10%. The research firm defines “top-tier” centers as those located in affluent areas “where a typical shopper has an annual income of over $200,000” and which tend to feature newer brands and luxury retailers.
Between 2020 and 2022, these malls reported an annual growth rate of 5% with $7.5 billion in total revenue last year, according to the report. While lower-tier malls lagged slightly behind in revenue — reporting only $6.4 billion — they experienced a larger growth rate of nearly 9%.
The Importance of Occupancy Rates
On average, top-tier malls were more than 95% leased last year, while space in lower-tier malls in less-affluent regions were about 89% leased. Coresight found the numbers still lag slightly behind pre-pandemic levels, but remained promising.
Brands Adapting to the Changing Landscape
“Occupancy rates are the No. 1 indicator of a mall’s health,” said the company’s CEO Deborah Weinswig, adding that any number above 92% is considered very good.
Brandon Isner, CBRE’s Head of Retail Research for the Americas, said occupancy rates of 100% are not necessarily a goal for malls looking to stay competitive and attractive, and store closures do not automatically mean the mall format is in trouble.
The Benefits of Store Turnover
A slight turnover in tenancy, helped by a small margin of unoccupied retail space, means properties can stay on top of trends and feature the most profitable retailers. “The mall should be a living breathing, organism,” said Weinswig. “And brands have their own life cycle.”
Adapting to the Rise of E-Commerce
Over the past decade, the growth of e-commerce has incited fears that online shopping would ultimately replace the physical mall experience, particularly for a generation who grew up immersed in a digital landscape.
While e-commerce has been transformational, “the idea that it was going to kill brick and mortar retail didn’t take into account the entire equation,” said Isner.
The Synergy Between Physical and Online Shopping
The mall as a retail concept is alive and well, with retailers pivoting to fit the demands of a digital age. Rather than jostling with brick-and-mortar stores for supremacy, each shopping format is bolstering the other. Omnichannel marketing, where a brand has both a physical and online presence, has been a major factor driving mall growth, according to Coresight.
The Importance of Gen Z Consumers
Gen Z consumers are a huge market for retailers looking to stay relevant, according to analysts, and these shoppers are leading the charge in reviving the mall experience. A socially conscious generation acutely aware of climate change, Gen Z is also more likely to support brands prioritizing sustainability. According to June data from the International Council of Shopping Centers, 56% of Gen Z shoppers “are willing to spend more to purchase sustainably sourced products.”
The Social Appeal of Malls
“Social gets them in the door, but they’re not shopping online,” said Lee, noting that 78% of Gen Zers and 70% of Millennials follow luxury brands on social channels. “They are wanting an in-store luxury experience. They may have researched this product online but they want to go into a store, have a very knowledgeable sales staff help them and possibly even buy more while they’re there. That in-store experience is so critical.”
The Need for Evolving Mall Experiences
Almost two-thirds of Gen Z consumers also say they go to malls for the social aspect, not for any specific product, according to the ICSC. In 2020, shuttering stores spurred predictions that the pandemic would be the final nail in the mall’s coffin. But a post-pandemic society has proven hungry for communal spaces.
The Future of Malls
Properties offering high-end dining, shopping, and entertainment activities will continue to be important retail spaces, according to Coresight. The mall continues to evolve and redefine its offerings but, for now at least, it is far from obsolete.