Why Retailers Are Abandoning Traditional Malls

Tenants’ Renewed Focus on Profitable Locations Fuels Exodus From Aging, Indoor Properties

The American mall is undergoing a transformation, but retail property professionals are still assessing what exactly it’s turning into.

Industry analysts agree, after thousands of stores have closed, that the “if you build it, they will come” strategy woven throughout the retail industry’s history has officially expired. Tenants and customers alike are abandoning the days of shopping in traditional, big-box anchored spaces.

Prominent retailers such as Gap, Bath & Body Works, Foot Locker and even Macy’s are offloading their locations in aging, indoor properties across the country as the vestige of the 1990s and early 2000s has lost its grip on American culture. As the iconic multilevel escalators, food courts and sprawling surface parking lots have emptied, companies long considered indoor-mall stalwarts are shedding their old stores and replacing them with locations with fast access and some element that’s worth the trip rather than ordering online.

“Retailers are trying to close out all of the locations that no longer work,” Neil Saunders, an analyst at GlobalData Retail, told CoStar News. “Profits are under a great deal of pressure, so companies are looking carefully at the performance of their portfolio across all outlets and property types, and the weakest performers and those with the weakest prospects are ones in traditional malls.”

In referencing traditional malls, retail executives and stakeholders are talking about the enclosed properties in lower-tier cities and suburbs that were anchored by now-defunct brands such as Sears, Lord & Taylor or Mervyn’s. The shopping centers were backdrops in movies such as “Clueless” or “Fast Times at Ridgemont High,” and customers were fine with wandering around to window shop and sip on an Orange Julius.

To be clear, the mall isn’t dead. But the split between successful and soon-to-be-obsolete retail properties has widened in recent years because of a confluence of factors such as department store closings, a shift toward experiential retail, the pandemic, and tenants’ demand for storefronts in accessible, well-located areas.

The longtime formula of sandwiching a collection of tenants between two or more big-box anchors has been thrown out the window. Customers are demanding more of a destination worthy of a trip that goes beyond simply placing an order online. Retailers are hunting for spots that are easily accessible in order to accommodate convenient in-store pickups and build more brand awareness.

‘Downward Spiral’
“They’re not performing as they once did, and retailers are pulling out since they don’t want to be in those closed-off locations,” Saunders said. “When you look at those types of malls, the ones companies are pulling out of are the malls that are just horrible locations. They were built in the 70s and 80s, haven’t been refreshed or refurbished, and they’re closed-off places without much natural light. Nobody wants to go to them now since there are other, much better places to shop. That downward spiral has meant retailers are taking a stricter view about where they want to place their bets.”

More Research Can be Found on CoStar