American Malls: Fading Dream

Ownership of televisions and landline phones is declining. There were no new regional shopping malls under construction last year in the United States. Americans’ standard of living remains under pressure and high debt levels constrain spending. Gas prices near all time highs. Congestion increases as road and mass transit spending get curtailed in budget cutbacks. And New Jersey moves ahead with trying to secure a deal to finish what will be the third largest shopping center in North America. Something doesn’t fit here.

Formerly named Xanadu, now rechristened the American Dream, this star-crossed $2 billion development was supposed to open for business four years ago alongside the site of the Giants-Jets football stadium and a failing horse-racing track in the Meadowlands. It couldn’t attract enough stores, then got whipsawed by the recession, has been roundly panned by architecture critics for its tacky facade, and most recently part of its roof caved in during a snow storm.

After multiple failed ownerships and various forms of generous state aid sent down the drain, the free-enterprise Governor of New Jersey appears ready to support a new effort by the operators of the continents’ two largest malls to revive and expand the project to a humongous seven million square feet, including its amusement facilities—a skating rink, ski slope, water park and fun rides--wheeee. Instead of letting the already amply tax payer subsidized project sink in the swamp, the governor apparently believes the prospect is just too compelling for bringing the mix of entertainment and retailing found at the likes of the West Edmonton Mall and Mall of America in Minneapolis to the New York metropolitan area. For taking what amounts to an additional $1.5 billion dollar flyer, developers would receive various new state tax breaks under the guise of creating more construction and service jobs amid the marsh land just across the Hudson from Manhattan’s theater district and up the Jersey turnpike from another Six Flags.

The absurdity of continuing this project boggles the mind when you consider that the governor turned down $300 million in federal aid for building a new commuter train tunnel into the city, because he said it would be fiscally irresponsible.

At a time when retailers are reconfiguring and retrenching in the face of internet shopping and slackened consumer spending, any new mall let alone a giant facility confronts considerable headwinds. While malls won’t disappear from the suburban landscape, the concept has become entirely dated and so 1980s. It’s more than the recent recession that has kept most developers on the sidelines. We don’t need any more of them. With less disposable income, folks are shopping less and sticking closer to home. They have better things to do (especially in the New York metro) than get stuck in traffic to roam around an oversized shopping center with the same familiar (“boring”) line-up of chains to sample. Mass transit starved New Jersey has already created a massive bottleneck around the Meadowlands—best case luring tens of thousands of shoppers onto area roads each day would make often unbearable congestion even worse. And again, best case how many older malls with their tax base supporting surrounding towns would be killed off by the state-subsidized American Dream drawing away stores and shoppers?

And then what about the commuter rail tunnel which now won’t get built for another generation at least? Instead of New Jersey getting behind a 21^st Century oriented infrastructure project to improve regional transportation for decades to come, the state directs its limited resources at a 20^th Century-style white elephant. The time for this American Dream has passed us by.

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A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.