I admit it. I got it wrong. In April 2005 — following the Federated Department Stores/May Department Stores and Kmart/Sears mergers, I penned a piece entitled “The Mall is Dead.” You can look it up. If you do a Google search it's one of the first results you get.
My thinking at the time was that in remaking the department store landscape, thesignalled something bigger afoot for the entire concept of enclosed regional mall.
Of course, we at Retail Traffic weren't the first (or last) to reach that conclusion. In 1998, Time had its infamous “Kiss Your Mall Goodbye” cover as it hailed the arrival of internet retailing. A decade later, during the depths of the recession, Newsweek speculated that a steep decline in discretionary spending would spell the death knell for malls.
It turns out that the enclosedmall is a lot more resilient than some people thought. This is a big reason why the firms that specialize in the format have never wavered from their commitment to it. Sure, Simon Property Group, General Growth Properties, Westfield Group and the other titans have diversified their portfolios and experimented with new formats. But malls remain the core of their businesses. And regional malls continues to deliver them juicy returns, quarter after quarter.
Regional malls, in fact, seem to have weathered the Great Recession better than many of the new formats that were supposed to replace it.
That's not to say that any of the trends identified as mall killers do not present challenges. For example, it remains true that the department store sector is not what it once was. The sector accounts for just 2.5 percent of mall sales (although, that share rose for the first time in more than 20 years in 2010). Andare still second-guessing the Kmart/Sears deal. (See p. 98 for the latest on that.) As a result, regional mall owners are still conducting ongoing experiments with other retailers in attempts to emulate the pulls department stores once had.
In addition, internet retail does continue to increase its share of sales annually. It remains a factor that will affect retail real estate going forward. But it is increasingly also looking like the Internet and the ever-expanding roster of Web-enabled gadgets will actually serve to enhance the in-person shopping experience rather than replace it entirely.
These are factors that do need to be reckoned with. Despite the mall's attractiveness to consumers, there is little room for newof enclosed regional malls. In fact, no new enclosed regional mall has opened in the U.S. since 2006.
In addition, some older and lesser quality malls that sit in areas where the demographics or other factors make it a weaker area than when it was built will need to be repositioned or repurposed entirely. Many dated malls are due for redevelopment.
But it should be evident by now that regional malls will weather any challenges that emerge in the coming years. The companies behind the properties are talented operators. They will be able to adapt to whatever challenges arise.
As for me, I will not make the mistake of underestimating the sector again.