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The Death of the American Shopping Mall Is Coming Sooner Than You Think

Last Updated September 23, 2020 1:59 PM
Stephanie Bedard-Chateauneuf
Last Updated September 23, 2020 1:59 PM
  • The pandemic is accelerating the demise of shopping malls.
  • A third of U.S. malls could close their doors by next year.
  • Consumers are increasingly shopping online instead of going to brick-and-mortar stores.

If you like to shop for clothes, drink coffee, and gather with friends at a shopping mall, you will be sad to learn that a third of America’s malls might disappear by 2021.

The Pandemic Is Accelerating The Fall Of The Mall

Retail expert Jan Kniffen  initially expected that 33% of malls would close permanently by 2030.

The retail sector was already facing challenges before the pandemic, with buyers leaving malls behind for online shopping.

The ongoing economic crisis is accelerating the demise of shopping malls. That’s why Kniffen now expects a third of U.S. malls to close by next year.

According to commercial real estate services firm Green Street Advisors , there are still about 1,000 malls operating in the U.S. today.

A report by Coresight Research predicts that a record 25,000 stores could close this year,  with 55% to 60% of those closures situated in America’s malls.

In recent weeks, bankruptcy filings in retail have started to increase.

Bankruptcy doesn’t necessarily mean the end of a business. It can be a way to get rid of debt, reorganize, and come out stronger.

But during the pandemic, bankruptcies can be a death sentence for retailers. In turn, it threatens thousands of additional workers in an economy that has already suffered tens of millions of job losses.

Big chains like Neiman Marcus, J.Crew, Stage Stores, Tuesday Morning, and J. C. Penney recently announced that they were filing for bankruptcy  and closing stores.

These bankruptcies don’t bode well for shopping malls. An uptick in bankruptcies and liquidations puts additional pressure on the remaining retailers rather than allowing them to benefit from reduced competition.

As shopping malls lose their anchor stores, buyers have even less reason to go there.

Coresight researchers said in the report: 

If the anchor tenants close stores in the mall, other tenants are likely to follow suit. Some of these may enter into co-tenancy clauses that enable them to pay lower rent or break their leases if an anchor tenant leaves.

An overabundance of vacant storefronts will leave owners struggling to fill these spaces or find new uses for their real estate.

Online Shopping Is The Future Of Retail

Deborah Weinswig,  Coresight founder and CEO,  expects  that the return to pre-crisis levels in offline discretionary retail sales will be gradual. Consumer confidence, demand, and spending should be short of normal for some time.

Specialty stores across the United States  will be the hardest hit, led by apparel retail and department stores.

An eMarketer report predicts that total U.S. retail sales  will drop by more than 10% in 2020. They won’t rebound from pre-pandemic levels until 2022.

All categories within retail except for food and beverage, and health and beauty, are expected to register sales declines due to the pandemic.

But online sales are expected to surge 18% this year, as many consumers are switching to online shopping. Amazon (NASDAQ:AMZN) has seen a surge in demand during the pandemic.

E-commerce was already on the rise before the pandemic, but the crisis has accelerated this trend.

Consumers are getting used to shopping online. So, even when the virus disappears, they will likely continue to shop online.

Retailers who are able to adapt to changing shopping habits will survive. But the shopping mall will die soon.

Disclaimer: The opinions in this article represent the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned companies.