The Top Shopping Mall Trends To Watch Over the Next Decade

 

By Tricia McKinnon

If you rolled back the clock to 50 years ago it would be hard to imagine a world where malls were not at the centre of commerce. A mall was the place where you could grab a bite to eat and get your shopping done all within one trip. While malls still serve this function today the advent of online shopping has meant your local mall isn’t the only game in town. You can shop online or go to your local power centre, often helmed by a Walmart or a Target, to get everything you need. 

This added competition has called into question the viability of many malls with an estimated 25% of the nearly 1,000 malls in the United States expected to close in the next two to four years. “[The Class A malls] will continue to do well,” said Keith Jelinek, a senior managing director at Ankura. but “I think we’ll see some of those [struggling malls] completely convert and go away.” If you are curious about the future of your local mall then consider these trends which are impacting shopping malls across North America. 

1. A new model without traditional anchor tenants will prevail. The first shopping centre in the United States opened in Edina, Minnesota in 1956. Since then thousands of shopping malls have popped up across the United States. The traditional model for a shopping mall was centered around anchor tenants. The purpose of an anchor tenant is to drive foot traffic into the mall. 

But as anchor tenants such as Sears, JCPenny and Macy’s faced financial difficulties and closed stores the viability of this model came into question. In 2000 Sears had 863 mall-based stores and an additional 1,200 retail stores in the United States. Sears has only 15 full line stores now. Sears is not entirely to blame for struggling malls. Department stores, a mall staple, have been in decline for at least a decade. Between 2007 and 2018 the number of department stores in the United States declined by 1,159 while the segment featuring the highest growth, dollar stores, saw its store count increase by 12,535 stores. 

The poor performance of department stores has had a painful ripple effect on malls. For example, in 2021 there were 750 vacant anchor tenant spaces in malls in the United States. Without an anchor tenant to drive traffic other tenants in the mall often suffers. Rolling Acres, a mall in Ohio went into bankruptcy proceedings after its anchor tenants, Macy’s Sears and JC Penney closed down. 

As shopping patterns change with more and more consumers choosing to shop at discount stores such as dollar stores or big box retailers like Target department stores have taken a hit and subsequently so have malls. 

2. The mix of retail stores in malls is changing. If you have noticed that the mall near you is changing then you’re right. In the past as much as 70% of the stores in a typical mall were allocated to soft goods retailers selling footwear and apparel. But that is changing since we simply aren’t spending as much on clothing as we used to. In 1920 Americans spent 17% of their income on clothing. By 2020 Americans only spent a paltry 2.4% of their income on clothing. If you have a smartphone and a data plan then you know where more of your paycheck is going today than what would have been the case 20 years ago. Morgan Stanley believes the clothing market has “hit a ceiling” and is going into a “structural decline.”  

If consumers are spending less of their discretionary income on clothing, a mall staple, then what stores can we expect to see in the future in malls? In a survey of 1,000 Canadians conducted by The Globe and Mail in 2021 consumers provided some insight into what they would like to see in shopping malls.

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The food court is always one of the busiest places in a mall which makes it unsurprising that having a great assortment of food is the number one draw for shoppers. In recent years many malls have updated their properties to include food halls containing local chefs, sushi bars, and premium coffee shops among many options designed to lure consumers in.

Many malls are also transitioning their properties into mixed use spaces to allow for residential buildings. In Canada, the mall with the highest sales per sq. ft., Yorkdale Shopping Centre, is planning to add rental apartments to its property. Foot traffic from people living in residential properties attached to a mall contributes to the viability of retailers within the mall and with more workers working from home now having a mall nearby provides easy access to places to eat for lunch and dinner. “Multifamily has been more in favor by investors over the past few years than office, so this goes to show that multifamily and retail complement each other quite well,” said CoStar analyst Robin Trantham.

Mall owners are also adding more experiences as a way to increase mall traffic. In Minnesota, Mall of America opened an 18,000 sq. ft esports venue last year that will include a gaming lounge with food and beverages and seating for a live studio audience to watch live streamed esports games. “Tapping into the esports landscape has been something we’ve had on our radar for a long time, however, we wanted to ensure that we were approaching this audience in a holistic way,” says Jill Renslow, EVP of business development at Mall of America. The goal is to make Mall of America “the premiere esports destination hub for guests and global esports fans alike.”

In 2021 Northshore Mall in Massachusetts opened Life Time, an 116,000 sq. ft “luxury athletic resort.” The resort has a fitness centre with 400 pieces of fitness equipment that are best in class, dedicated kids spaces, a spa, an outdoor pool with resort style seating and a café.  “The pandemic has just accelerated those conversations surrounding the right tenant mix, how to attract people to the mall [and] what we should do with the actual physical real estate,” said Hani Abdelkader, a principal with commercial real estate services firm Avison Young in Calgary.

3. Retailers are shifting to off mall locations. Many retailers are planning to move their stores to off mall locations. Gap, a long-time mall staple, has said it plans to have 80% of its sales from its Gap and Banana Republic brands come from “off-mall, strip, outlet and online formats” by 2024. “Our strategy is rooted in moving away from traditional malls,” said former Gap CEO Sonia Syngal. “We have sharpened our real estate strategy so that our stores will be where our customers want to shop today.” 

Gap, like several other retailers, wants to take advantage of some of the benefits of off mall locations which tend to have cheaper rents and are closer to where consumers reside. Signet Jewellers which owns the Kay and Zales chains echoed a similar sentiment. “The foot traffic for off-mall locations is better than what we’re seeing in the mall, certainly in this time [2021]. It’s really important, and we see that shift continuing,” says Joan Hilson, Signet’s chief financial and strategy officer. Hilson says that its move off mall is “an opportunity for a better economic model.” Macy’s, Victoria’s Secret and Foot Locker are also moving more stores to off mall locations.

Tricia McKinnonTrendsComment