The Death and Life of the Suburban Class A Mall

Ms. Real Estate

—Swimming in the Alphabet Soup.

Dear Alphabet Soup, Good question.  Older C and D malls, as your letter indicates, are already goners. B grade malls, according to Green Street Advisors, make up about 37% of all US malls, while accounting for only 17% of sales. A grade retail malls, those that offer luxury specialty goods, account for 3.5% of all malls but 22% of all value. The A mall customer frequently views shopping as a recreational activity. The fate of B-rated malls is today’s great unknown, and their ability to survive will depend upon some factors they cannot control, like location, as well as those they can affect, such as shifting a percent of their retail tenants to experiential activities. The younger generation purchases a high percentage of all their goods on the internet. However, they too often want to view major products like furniture before purchasing the product on the net. This is why retailers like Restoration Hardware are improving their website and shifting out of traditional mall stores and into new flagship stores in high income locations. Even after recent declines in on-the-ground retail space, the US remains well ahead of other countries with respect to the number of retail square feet per person. Currently, the US has 24 square feet of retail space per person, or 60 percent more retail square footage than Canada and more than three times that in the United Kingdom. In comparison, per capital income in the United States is only 19 percent higher than in Canada and 33 percent higher than in the UK. We can expect further shrinkages in the country’s total amount of retail space as the industry continues to be in flux. Bottom line, I only see the A malls as being safe from closure or shrinkages in retail space in the foreseeable future.