Malls: the long goodbye

Second Floor, Owings Mills Mall

The slow contraction of the market for enclosed suburban shopping malls is part of a long-term trend, exacerbated by the credit crunch. I found a 2005 report from the International Council of Shopping Centers (hardly an anti-mall bunch!) that included a very noisy graph of shopping mall openings over the years. I chose to smooth the curve by (arbitrarily) calculating three-year moving averages instead, rounded to the nearest whole #:

 

1987-1989: 10
1990-1992: 15
1993-1995: 6
1996-1998: 6
1999-2001: 5
2002-2004: 4

 

The steep decline from the early ’90s occurred despite bubbly, credit-happy economies in the late ’90s and mid ’00s. Also, keep in mind that malls take several years to finance and build, so arguably developers quietly began aborting mall proposals around 1990, when the power center began its meteoric rise (and subsequent decline; Emerging Trends 2013 ranks them as the worst property type to invest in). The numbers since then (also from ICSC and from press reports) have been just dismal, both before and after the 2008 crisis:

 

2005: 2
2006: 1
2007: 0
2008: 0
2009: 0
2010: 0
2011: 0
2012: 1*

 

Even in a recent article trumpeting “Return of the Mall!,” Retail Traffic magazine admitted that “there is little, if any, room for new enclosed regional mall development… Even prior to the current downturn, the U.S. mall market was near the point of saturation. During the 1970s, the heyday of the mall, U.S. developers delivered a total of 375 million square feet of new space. By contrast, in the 2000s, new mall deliveries fell 62 percent, to 144 million square feet, according to research from CoStar.” The best that the article can muster is that trophy malls are still prospering, and that other shopping-center categories have been hit by bigger sales declines. Personally, I don’t know if that’s saying much; I’ve always thought that power centers were most vulnerable to online shopping — out-competed on price and selection (the only selling points of big box) — and we’ve seen that with the recent collapse of many big-box chains.

 
Given the number of malls that have closed – over 40% of enclosed malls built even in the DC region have shuttered – malls have been trending in reverse for almost 20 years now. They were sputtering in the mid/late 1990s, and over the 2000s I’d bet that many more have closed than opened. This isn’t some short-lived, newfangled fad, this is a seriously big shift in how Americans shop (and, in a consumer society, live).
 
Retail may have been the first property sector to see a huge momentum shift away from Edge Cities. Now that momentum in the residential and office markets** has shifted away from the suburbs, it’s hard to argue that drivable suburbia is still what Americans demand.

* City Creek Center in downtown Salt Lake City replaced two enclosed malls that had failed. Net mall count was still reduced by one.
** Emerging Trends ranked “severely handicapped” suburban office the second-worst investment. Just as with malls, this trend is a long time coming: nationally, suburban office vacancy rates used to track downtown office vacancies, but decoupled in 1998 and have stubbornly remained about 5% higher through peaks and troughs ever since. Similarly, the best housing investments were ranked as infill/intown, senior, student, and affordable, with golf course communities and master-planned resorts ranking a shade above “abysmal” as the absolute worst property subsectors to be in.

3 thoughts on “Malls: the long goodbye

  1. Malls have been in sad shape for a while. As one who argues for something other than drivable suburbia, I still think at this point people do expect it, maybe not outright demand it. Great numbers on the openings, although I don’t think it can really be directly correlated into there not being a demand per se. Mega malls are hard to open like gangbusters like you mentioned and the past decades were only catching up to the population shift elsewhere.

    Nonetheless, good to see that these and the power centers are on the decline and maybe we are heading towards a smarter development. Now we just need to cancel those store credit cards we got in college on loose credit policies…

  2. Does this really effectively translate to the climate we experience in Edmonton?
    I can understand how the general trend may be in a downward curve, but in Edmonton, I believe that the sprawling California-style shopping areas are not a good alternative.
    For a city that usually experiences 6-8 months of winter, an enclosed shopping area is more desirable. I often wish in the winter months that there was a larger variety of indoor venues to explore in our city.

  3. @Erik: the article underlines that the “recent” difficulties for malls are anything but. In fact, they were foretold in the early 1990s as openings were cancelled. With each successive economic cycle, more of the previous building stock gets cycled out and little new product is replacing it.

    @Victoria: curiously, people in “hostile” climates tend to really enjoy the few outdoor days they can have. Enclosed mall demand is stable or declining from Syracuse to Singapore. This isn’t to say that other enclosed environments won’t arise to fit local concerns and needs.

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