While pre-pandemic retail was already transforming, COVID-19 accelerated consumer demand, habits and preferences as the retail industry was hurled into the future. Unfortunately for malls, especially class C and D traditionally enclosed shopping centers for which account for majority of all U.S. malls, there are substantial retail space vacancies.
With increasing retail vacancy rates and rents cratering, the phrase "adapt or perish, now as ever," applies to not only retail in general but more specifically, malls. With decade high mall vacancy rates, consider all malls on notice, even some true class A malls for which will likely avoid majority of the byproduct from decreasing department stores and apparel retailers. But, not all malls experience suffering equally. Similar to retail in general, there are some clear winners and clear losers.
With every retail bankruptcy filing or store closure announcement, especially department store anchors, the decline in mall rates and rents accelerates. Prior to the pandemic, in 2018, retail store closures reached 5,524. In 2019 retailers closed 9,350 stores. That represents a 70% increase from the 5,524 stores that closed in 2018. More than 8,736 permanent store closures were recorded in 2020 according to Coresight Research, as consumer purchase methods convey a message of safety and convenience.
Consumer purchase options such as delivery, click-and-collect or curbside pickup will be of critical importance to retailers in our current environment and beyond as consumer preference for convenience is not anticipated to subside. With ongoing emphasis being placed on convenience spanning all of retail, malls have an opportunity to enhance consumers shopping experience. While enhancing the shopping experience is a good start, the majority of malls need to do more. Now, both mall owners and operators have a tremendous opportunity to reconceptualize their tenant composite to align with community businesses and neighborhood requisites. Mall attributes e.g. layout, location, parking and space, may prove to be appealing for a wide range of possibilities with some caveats:
- Office: corporate offices (future is uncertain)
- Residential: apartments and hotels (aid housing shortage)
- Industrial: distribution and fulfilment (last-mile delivery/booming e-commerce)
- Medical: healthcare armories, hospitals and acute-care facilities
- Education: satellite campuses, trade schools and community colleges