The death knell for malls tolled loudly in the media during the Fourth of July weekend as retailers continue to assess their long-term prognosis from the pandemic damage. More bankruptcies both announced (Lucky Brand) and rumored continue to shake the format.
Some coverage of the lackluster mall performance reawakened calls for reuse options for malls that have lost anchor tenants, and a New York Times report examined potential social ramifications as department stores leave many malls with gaping dark holes where stores used to be. The risk of closing malls, the report said, has the potential to reshape entire communities, which are debating whether abandoned malls can be turned into office space or affordable housing.
“More companies have gone bankrupt than any of us have ever expected, and I do believe that will accelerate as we move through 2020, unfortunately,” said Deborah Weinswig, founder and CEO of Coresight Research, an advisory and research firm that specializes in retail and technology. “And then those who haven’t gone bankrupt are using this as an opportunity to clean up their real estate.”
In fact the real estate angle is starting to get more play as the future of malls is debated in boardrooms and decided by consumer foot traffic. Bloomberg reports, for example, that developers are turning parts of a 41-year-old shopping center near Seattle into Avalon Alderwood Place, a 300-unit apartment complex with underground parking. Stores will still take up 90,000 square feet of Avalon. But the focus of developing the mall has fallen to housing as anchor tenants, not retail.
“This project is a great example of evolution in the shopping center industry,” says a spokesperson for Brookfield Properties, which owns the property and is collaborating with AvalonBay Communities, Inc. on the residential component. (Brookfield declined to offer a cost estimate for the project.) “Today, people prefer to live in smaller spaces and want walkable developments rather than relying on vehicular transit. This project caters to these needs.”
Meanwhile, Deloitte has checked into malls and department stores and does not see an apocalypse ahead. It looked more at the psychology of consumers as the driver behind a potential recovery. It noted that consumer confidence has held up during the pandemic.
“We found that these numbers do not imply retail disaster; in fact, the needles on these dials point up,” said the Deloitte report. “While US GDP growth has been modest as of late, it has rebounded from negative growth during the recession and has been growing in a range of 1.5–2.5 percent annually, until recently when the pace of growth picked up: US GDP expanded at an annual rate of 3.3 percent in the third quarter of 2017, the fastest rate in more than three years. More importantly, the outlook for the future has improved: Due partially to the 2017 tax reform bill, GDP is forecasted to grow around 3 percent in 2018, according to the Conference Board. Further, the equity market has gone through the roof, with the S&P 500 stock index more than tripling from a low of 735 trillion in February 2009 to 2,663 trillion in February 2018.”
And at least one industry veteran is envisioning a new future for the physical store. Net-A-Porter CEO Federico Marchetti told the Robb Report that the death knell has been heard before.
“Some were sounding the death knell for physical stores back when I started Yoox in 2000,” he said. “I didn’t believe they would disappear then and I stand by this today. I believe that a union can be created between the two universes — online and offline — an invisible, borderless integration with technology enhancing the experience. I also believe that we have a profound responsibility to enable and support the next generation of entrepreneurial talent for our industry, be that in technology, design, craftsmanship, sustainability.”