Exploring the changing face of malls and shopping centers
Are malls becoming a thing of the past? Or just at a point of reinvention?
Exploring the changing face of malls and shopping centers.
Brick-and-mortar retail within shopping centers and malls alike has certainly endured upheaval between recent inflation, gas price hikes, and the pandemic, however many are experiencing a resurgence.
Whether you last visited a mall to buy Christmas gifts for everyone on your list, meet friends for dinner, buy a new outfit, or play laser tag, in many communities retail shopping in large shopping centers and malls is arguably back. In other areas, consumers may be shocked to find when driving by their local mall that it has been turned into something wholly new, like a medical center.
It’s safe to say that the retail sector is evolving past what we thought it was, and current headlines share a mixed story for the future of our beloved malls and shopping centers.
For some, it’s a story of retailers in crisis – plagued by the force that is online retail, emptier downtowns, or shifting consumer behaviours amid murmurs of a recession on the horizon. And for others? It’s a tale of opportunity, reinvention, and finding a way to win over the hearts and wallets of consumers, come what may.
So, which is it?
Are malls becoming a thing of the past? Or are they simply at a point of transition? Let’s take a look at the landscape, as we see it.
Retail isn’t dead, it’s simply changing
According to Avison Young’s Vitality Index, during the peak of the pandemic, foot traffic across retail locations dropped as much as 79% in the first month as lockdowns were imposed, and while shopping mall visitation increased by 46.4% from 2020 to 2021 it remained 28.1% below 2019 levels. Now having returned to what many would argue is a semblance of normalcy, we see retailers vying for the same spaces within shopping malls to once again be part of the diverse tenant mixes found within many malls that survived the downturn.
That said, malls have been steadily changing for the last 10 years or so, and the need for evolution (while accelerated by the pandemic) has been a trend that mall owners have come to expect. Today, mall owners continue to look at repositioning assets as customer expectations evolve and change, creating more need for experiential moments, and enough new concept and quality goods to create the desire to make the drive in to store.
Malls that are embracing the need for new offerings and creating commitment to quality and diversity of experiences are seeing the widest ranges of success.
Shoppers still crave what they can’t get online
“Whereas the shopping mall disrupted downtown retailing and hundreds of US cities in the '60s, '70s, and '80s, now it's the internet's turn to disrupt the great American shopping mall. And that was a trend that was well established and had been gaining tremendous amount of momentum pre-COVID.” Mark Cohen, Director of Retail Studies, Columbia University
While upticks in online shopping are trends without question, make no mistake, in person shopping is still popular. This is notably true for some critical lines of products such as furniture and large electronics that many people still like to see in person before they make their final purchase.
Big picture, we are in a time where customers crave choice around how they buy. Product to product today’s consumers want to decide whether to browse online and shop in person, browse in person and shop online, or buy exclusively online or in person in a unique retail experience that works for their needs.
Additionally, non-retail or experiential retail has seen a tremendous jump in appeal. Non-retail experiences give consumers a different reason to visit a shopping center or mall, and statistically experiential retail extends the time consumers spend at a center, thus leading to increased revenue synergy for retail cotenants.
The most successful retailers today learned prior to and during the pandemic to provide cohesive omnichannel experiences for their customers. Brick and mortar stores should continue to highlight offerings that are complimentary to their online offerings and yet are only available in stores. Whether providing opportunities for demos and education or simply providing the peace of mind that consumers will know exactly what they are buying, individual retailers should continue to incorporate the benefits of in-store purchase experiences into their ongoing marketing strategies. Likewise, often the malls that advertise their unique mix of shops along with their accompanying unique experiences are the most successful in convincing shoppers that their particular location is where consumers should make their purchases.
For locations where brick-and-mortar retail has exhausted all options, opportunities to readapt abound
While there can be many hoops to jump through and various restrictions to overcome when repositioning a mall asset into another type of real estate offering, for some mall locations or anchor spaces that have been vacant for some time, it can feel like the next best option to find other use for the space.
When all else fails, an assessment of the location’s needs can help point developers in the right direction for redevelopment of a mall or mall anchor. Consider: if not a mall or shopping center, what does this community need? What will serve it best?
“There's a lot of opportunity for redevelopment of malls, outlets, and shopping centers. Redevelopment can be especially important in areas where construction costs and timelines have increased dramatically, and thus, new construction is stalled. One example of a trend we see continuing is the redevelopment of mall product into “eat/live/work/shop/play” concepts, and we have several examples where this has been successful. Medical or urgent care offers another viable replacement for existing mall retail. Another trend we've seen is that mall anchors, such as JC Penney, who have declined over time or are going through restructuring are likely to continue to be sold near term as owners and bondholders and mall anchor product face continued pressure to sell based on provisions in their bankruptcy filing. There are many ways that we can help brands to evaluate a location’s performance. And more than ever, tenants are paying attention to store performance in each individual location and market. But overall, I would say we just continue to see the changing of spaces. There's just a lot of change going on in the retail industry, but there's tons of opportunity going forward.” Sarah Cafaro, Senior Director of Retail Sales in U.S. Capital Markets, Avison Young
There’s so much opportunity for the retail mall sector in real estate as we look ahead
While offerings such as climbing walls, new Soul Cycle locations, or diverse food options are great additions to existing merchandising plans, it is likely that malls that offer a combination of a) one-stop-shop approaches for consumers, b) unique experiences, and c) shops with product offerings that consumers need to hold in their hands before they make purchase decisions will come out on top.
Mall owners that prioritize consumers’ basic needs from their malls such as access, safety, regular maintenance and upkeep of their properties, and base their space and product strategies around human connection will find the greatest levels of success moving forward.
Has your relationship with retail and malls changed in recent years? How do you choose where to buy your favourite products? Share your thoughts after listening to the episode across social media platforms using the hashtag #ChangingPlacesPodcast.
Author: Rachel Kresge, Avison Young Global Content Development Manager