Why Do Some Malls Fail?

First, How Did We Get Where We Are – A Brief History of Mall Development in the U.S.

About 1,500 malls were built in the US between the 1960s and 2000s. The initial, massive wave of malls was built between the 60s and 80s. These malls were built during a time when retail offerings were relatively limited, and typically concentrated in the central business districts of cities and towns. Malls quickly became the absolute retail focal point within their markets, consolidating retail to effectively one location, and as a result, often decimating downtown retail.

Then starting in the late 80’s to early 90s, non-mall retail square footage across the U.S. exploded with advent of regional and super-regional power centers, community shopping centers, lifestyle centers and free standing big-boxes. These developments were often built around the periphery of malls or were built close to expanding suburban development. As a result, in addition to competing with a greatly expanded retail offering, a number of the earlier malls found that they had been out-positioned by a newer, larger, more attractive malls and/or other shopping venues.

So Why Do Some Malls Fail?

Malls can fail for several reasons:

  • Insufficient market area population to support the mall given the current retail landscape. For example, a significant number of malls were built within very small trade areas, that at the time could support the amount of retail that was consolidated at the mall. Today, within that same trade area (the population of which often times has not grown substantially) you may have a Walmart Super Center, a power center anchored by Target, Kohl’s, Dick’s, Bed Bath & Beyond, Petsmart, etc., a wholesale club such as Costco, numerous free standing full service, quick service and fast food restaurants, and a large variety of other retail offerings. Often these malls find themselves with an excessive amount of in-line GLA that simply can’t be filled with retail uses.
  • The mall has been competitively out-positioned by other newer, larger, more attractive retail venues, thus greatly impacting the long-term economic viability of the mall. This can include another newer mall, a lifestyle center or a large hybrid power/lifestyle center. As a result, shopping patterns change, trade areas shift or shrink, tenant mix suffers, occupancy and sales decline, and landlord investment often dries up. A slow death begins.
  • A demographic change or shift has impacted the trade area’s market support potential. This situation is sometimes seen in early, “inner-ring” malls that were built close to the city centers. Subsequent growth in the market results in “suburban flight” where higher income residents move out to the newly developing suburbs, with low to moderate income residents taking their place. The gradual decline in resident incomes and thus market potential causes a significant, often irreversible situation.
  • Lack of ownership focus. A mall must be cared for and continual reinvestment must take place to keep a property vibrant. The physical plant must be maintained, but most importantly, ownership must stay focused on the continued leasing and re-leasing of the property. Without the right mix of in-demand retail, entertainment, restaurants and services, the ability to generate traffic and sales is severely limited. We have seen numerous otherwise viable malls suffer greatly due to a lack of ownership focus and commitment.