Name: Why U.S. Malls Are Disappearing
Uploaded: 2021-04-20T08:07:55.000Z
Duration: 12 min 48 s
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were once known for their massive department stores, endless fast-food courts, it as a Friday night hangout

for teens. But with the rise of online retailers and the demise of the department store, it is a challenging time

In November 2020, two mall owners, CBL & Associates and Pennsylvania Real Estate Investment

Trust, filed for Chapter 11 bankruptcy protection after facing increased pressure due to Covid-19.

And according to a 2020 study, 25 percent of U.S.

malls are expected to close permanently within the next five years.

I think Covid really accelerated trends that were already at play prior to the pandemic.

It was retailers closing stores, retail bankruptcies.

Retailers were looking for ways to renegotiate leases or pay less in rent.

There are going to be malls that fail and they're going to be vacant spaces.

I just know in the Syracuse area we have one and the county just purchased it.

I don't know what the plans are, but it's a lot — a lot of empty space and a lot of parking spaces sitting

there doing nothing. Prior to Covid-19, with consumers craving experiences over traditional brick-and-mortar

retail shopping, malls were forced to pivot, offering everything from fine dining to indoor ski slopes.

But the pandemic has exacerbated the challenges at malls as social distancing has placed restrictions on

But what you'll see is the winners continue to emerge.

Malls are also a huge tax driver for the communities they serve and employ a lot of people locally.

So what will become of malls in America after the pandemic ends?

Malls in the U.S. took root at the end of World War II, alongside the growth of the suburbs.

In the 1950s, a booming economy helped a large segment of the population increase their prosperity, allowing

many Americans to purchase a new home and car.

Aided by a series of government initiatives, like the Veterans Administration Home Loan Program and the Federal

Aid Highway Act of 1956, a significant slice of the country was turning their back on cities and

Austrian born architect Victor Gruen, the man who many credit with later helping to provide those newly minted

suburbanites with a place to mingle and shop, saw an opportunity.

following Germany's 1938 annexation of Austria.

Once in the U.S., he established himself in the world of shop design by refurbishing retailers, including at least

In 1954, Greun's design of the Northland Center outside of Detroit, Michigan, debuted, making it

one of the largest open air shopping facilities in the U.S.

But Gruen, opposed to the country's growing reliance on the automobile, wanted to create an atmosphere similar to

his native Vienna — one of streets sprinkled with cafes, restaurants and commerce.

In 1956, his design of a Southdale shopping center opened in Edina, Minnesota.

The fully enclosed mall had a two-level design featuring 72 stores and anchored by two major department

stores. The space also had 5,000 parking spaces and central air conditioning.

You'd load up in a station wagon and you drive to the mall and everybody in the family would get

that one thing they needed while the family was there.

More than 40,000 people attended Southdale's opening day.

The venue was largely considered a success and was soon replicated across the country.

By 1960, there were 4,500 large shopping centers in the U.S.

By 1987, malls and shopping complexes accounted for over 50 percent of all U.S.

And they were becoming part of pop culture too, used as a backdrop for movies like Back to the Future, Mallrats

And even as a springboard for musical acts.

In 1992, the Mall of America, the largest mall in the U.S., opened adding attractions like roller

But the explosion of new construction was beginning to weigh on some locations.

From about 1975 to 2016, retail space capacity in

many cases in malls multiplied by four times the rate of population growth in

the United States. So in 2016, every single person in the United States had

24.6 or so square feet of retail space that could just be theirs.

The rise of big box stores like Walmart, discount retailers like HomeGoods, and the transition to

This has been the narrative for years now that we really got to a point where we're overbuilt.

We have too much retail space in the country.

Now that retailers are growing more of their business online, inevitably, that means, you know, they don't need

as many stores. So we've seen those store closures.

By 2017, there were roughly 1,200 indoor shopping malls in the U.S.

And yet if you look at retail pre and post the credit crisis, before the credit crisis, people used to walk

around in T-shirts that say "I way overpaid for this t shirt." Suddenly after the credit crisis, they

were all going for these things - phones -spending thousands of dollars on a phone that they used to get for

free. So the point is that people change their shopping habits.

And what needed to happen for the malls is that they needed to evolve as well.

According to a 2020 IBISWorld Industry report, the shopping mall management industry in the U.S.

is an $18.3 billion business and includes companies like Simon Property Group, Brookfield Property

In general, landlords like Simon make their money from rental income and property management fees.

Of the roughly 1,100 malls in the U.S., about 250 are considered class A malls, the top

performers that bring in the most sales per square foot.

A little more than 300 are categorized as C malls.

And the remainder are D quality or lower, that could be on their way out of existence.

Like a number of their retail tenants, the coronavirus pandemic has had a devastating impact on U.S.

malls. CBL & Associates has a portfolio of about 100 properties across 26 states,

including a number of B and C rated malls.

The company said with tenants not paying rent in others delaying payment, it was forced to file for Chapter 11

Pennsylvania Real Estate Investment Trust, which owns and operates over 22 million square feet of retail space

in the eastern half of the U.S., filed for bankruptcy protection that same day.

Simon Property Group, the biggest mall owner in the country and the largest operator of A rated malls,

including the King of Prussia in Pennsylvania and Roosevelt Field in New York, also saw a steep drop in

revenue after some retailers skipped out on rent payments.

In the fourth quarter of 2020, the company had total revenue of $1.1 billion, down 24

But a healthy balance sheet and a portfolio of desirable locations helped Simon fight back.

Retailers deemed non-essential — their stores were forced to shut, and a lot of retailers thought,

"OK, well, I can't pay rent or I'm not going to pay rent if I'm not operating this store." And

so these mall owners like Simon, like Macerich, they still have obligations on their ends to meet.

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Why U.S. Malls Are Disappearing

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