Some Malls Are Fated to Die. Here’s What Will Happen to the Rest
In some markets, the dying percentage may be closer to 50%, Moody’s says.
About 20% of 1,000 US malls will close or go through a “major repurposing,” but “the American mall is not, in fact, dead,” according to a new analysis from Moody’s Analytics.
Moody’s predicts that one-fifth of American malls will either be renovated, repurposed, or razed to make way for new properties. But what about the remainder? Well, they’ll survive. But to thrive, Moody’s maintains, they’ll need to be “well-located and maintained to a high standard, attracting a mix of quality and on-trend tenants necessary to create a critical mass.”
What’s more, gone are the days of “local” retail clusters: these are instead yielding to modern, large developments near transportation hubs. To lure customers away from the convenience of online shopping, experiential in-person shopping experiences are critical.
“The in-person shopping experience that consumers seek, particularly for experiential, trendy, and/or higher cost goods, cannot be replicated via e-commerce,” the firm’s latest report on regional mall notes. “Given this, we expect a further evolution of both the spatial relationship among malls and to the mall itself.”
Within the 20% of malls expected to die off, slow-growth cities in the North and Midwest will fare worse than other metros. Some cities may face an oversaturation, and in some markets, the dying percentage may be closer to 50%, Moody’s says. (Count Cincinnati, Chicago, Philadelphia, and Baltimore among those “slow-growth” cities that are overbuilt and facing the steepest decline.)
Repurposing those properties may be best centered in the medical office space: “With an aging population and an increasing need for medical practices, some of these older malls may have a new life as medical clusters coexisting alongside a few remaining retail tenants,” Moody’s states in the report. “Indeed, even many of the ‘laggards’ may find a new and worthwhile purpose.”
Conversely, markets in high-growth regions across the South will face less geographic and legislative roadblocks for developing the mega-centers customers are beginning to favor.