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Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - Mall Closures Accelerate 167 Shutdowns Annually Since 2017
The pace of mall closures in the US has significantly accelerated since 2017. Prior to that, the yearly average of mall shutdowns was around 581. However, since then, the number of malls closing each year has jumped to an average of 1,170. This dramatic increase indicates a growing problem for the mall industry. The surge in closures is linked to changing consumer preferences, where online shopping is steadily gaining ground. Evidence of the struggle is seen in high vacancy rates and mall properties selling at a significant discount compared to their initial purchase price. Forecasts suggest this trend may not reverse anytime soon, with some predicting a drastic reduction in the number of operating malls to a mere 150 within the next ten years. This projected decline points to a fundamental shift in how individuals choose to engage with retail environments.
The pace of mall closures has accelerated considerably since 2017, with an average of 167 shutdowns annually. This represents a dramatic increase from the 581 closures annually observed between 1986 and 2017, suggesting a more intense pressure on the mall model in recent years. While the peak number of malls in the US was around 25,000 in 1986, we now see a considerable decline, hinting at a substantial shift in consumer behaviour that favors other retail models. A Credit Suisse report from 2017 foresaw a significant decline in the mall sector, anticipating that 20-25% of malls would be shuttered by 2022, mainly due to declining store performance. Interestingly, the average selling price of a closed mall has been significantly depressed, sitting at about 43% below its initial acquisition value, implying a potential glut in the market for these properties.
The vacancy rates within malls have been a concern. Though the overall vacancy rate has decreased since 2021, it remains relatively high. In 2021, malls experienced an average vacancy rate of 11.4%, indicating a significant amount of unused space within the existing mall inventory. This has been accompanied by a noticeable decrease in mall visits, particularly during the holiday seasons of 2010-2013, when a decline of 50% was observed. It highlights the need for mall owners and developers to adapt to the evolving shopping patterns and consumer preferences to maintain viability.
It's fascinating to consider that the retail market itself is in a period of flux, with the decline of the traditional mall seeming to be a consequence of broader changes in consumer behaviour and technology, largely driven by the growth of e-commerce. The mall's fate appears to be linked to its ability to evolve and adapt. While some mall owners are attempting to adapt through pop-up shops and other initiatives, the future of malls remains uncertain. Experts suggest that a significant reduction in the number of malls to perhaps only 150 in the next ten years is a possibility. This makes one wonder how the retail landscape will adapt and reshape itself, particularly for communities that rely on malls as a central hub for social and commercial activity.
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - 2 Million Square Feet of Mall Space Demolished in 2022
The year 2022 saw the demolition of 2 million square feet of mall space across the US, highlighting the intensifying struggle facing shopping centers. This demolition trend is part of a larger pattern: the average number of malls closing annually has significantly increased. This escalating closure rate is intertwined with a shift in consumer behavior, with online shopping capturing a growing share of the retail market. The consequences of this shift are evident in the sharp increase in mall vacancy rates, which are now substantially higher than those for other retail spaces. The financial health of mall properties has also been impacted, with many selling for considerably less than their initial purchase price. The growing need to repurpose or redevelop struggling malls into other uses, a process sometimes referred to as "demalling," underscores the pressures these properties face in a changing retail environment. Adapting to evolving consumer preferences will be crucial for ensuring the ongoing relevance of shopping centers in communities.
The demolition of 2 million square feet of mall space in 2022 signifies a significant shift in the retail landscape. This equates to roughly 1,000 square feet per mall on average, given the accelerated closure rates, and highlights a critical reevaluation of space utilization as consumer behavior evolves. This large-scale demolition underscores the financial realities of maintaining underperforming properties. Many of these sites were once valued in the hundreds of millions, but now face demolition as a strategy to mitigate ongoing losses.
The prevalence of demolition in 2022, in contrast to previous years when mall redevelopment and repurposing were more common, hints at a growing belief that traditional mall structures may be fundamentally flawed. Past attempts at revitalization haven't been enough to draw in shoppers, leading to this drastic measure.
To put it into perspective, the 2 million square feet demolished could have held over 30 large supermarkets. This illustrates the sheer volume of retail space being reevaluated in the face of contemporary shopping patterns, with online purchasing continuing to gain momentum.
Alternatively, that same 2 million square feet could have accommodated over 1,000 new urban apartments. This raises intriguing questions about urban planning and the possibility of converting retail spaces into much-needed housing in a time of widespread housing shortages.
A closer look at the data shows that a significant part of the demolished space housed anchor stores, which historically were a major driver of foot traffic. Their closure suggests deeper-rooted issues with consumer behavior and the continued viability of the anchor store model in today's retail world.
Interestingly, some of the demolished malls were built as recently as the early 2000s. This rapid decline in lifespan highlights the accelerated pace of change within the retail industry. What once thrived can quickly become obsolete.
Malls, while having varying lifespans, typically endure for around 30 years. The rapid pace of demolition, therefore, underscores the need for more adaptable design principles that consider future uses. This is especially crucial for navigating economic fluctuations and shifts in consumer preferences.
The dominance of demolition over revitalization raises concerns about property management strategies. It's possible that opportunities for adaptive reuse, offering potentially more sustainable financial outcomes through innovative redevelopment, are being overlooked.
Beyond the economic considerations, the disappearance of these retail spaces impacts the social fabric of surrounding communities. Malls have long served as community hubs, and their absence could lead to diminished local economic activity and altered patterns of social interaction within these commercial landscapes.
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - Mall Vacancy Rates Double the Retail Average at 11%
Mall vacancy rates in the US have reached a troubling 11%, significantly higher than the average retail vacancy rate of about 5.4%. This means mall vacancies are more than double the rate seen in other retail spaces. This disparity underlines the ongoing challenges facing malls, particularly given the rise of online shopping and its impact on consumer behavior. The financial strain is also evident, as many malls are now selling for roughly 43% less than their original purchase price, indicating a possible oversupply of mall properties. While some high-end malls continue to boast high occupancy rates, the broader trend of increasing vacancies and the number of mall closures suggests a continuing struggle for the industry. There's a growing expectation of further mall closures and a need for owners to find more innovative ways to utilize these spaces in the future. This situation highlights the dynamic nature of retail and how it is being reshaped by changing consumer preferences and technology.
Mall vacancy rates in the US have reached 11%, which is double the average vacancy rate for other retail spaces, currently hovering around 5.4%. This disparity highlights a significant challenge for the mall industry. While the overall retail sector has shown signs of recovery, the mall sector continues to lag, with a vacancy rate considerably higher than the historical average for malls, which typically falls between 8-10%. This suggests that a significant portion of mall space is not generating revenue, adding financial pressure on property owners.
This situation hints at the need for malls to potentially embrace alternative uses beyond traditional retail. Converting some areas to community gathering spaces, office spaces, or facilities catering to health and wellness could become increasingly important to mitigating financial losses. High vacancy rates not only lead to decreased rental income but also have a significant impact on the market value of the properties, making it harder for owners to secure financing for potential renovations or repurposing projects. It appears that a crucial factor driving these high vacancy rates is the continued rise of e-commerce, which now accounts for approximately 20% of total retail sales. This shift in consumer behavior is impacting foot traffic to malls, emphasizing the need for adaptation.
Interestingly, the vacancy rates across the US aren't uniform. Some regions are experiencing significantly higher vacancy rates, potentially exceeding 20%, while others are closer to the national average. This illustrates how local economic factors and demographic shifts are impacting the health of the mall industry. Furthermore, the loss of anchor tenants, which historically drove significant foot traffic, has become a primary factor affecting vacancy rates in many malls. This chain reaction – fewer anchor stores leading to fewer shoppers – compounds the pressure on occupancy rates.
The social impact of high vacancy rates is also noteworthy. Malls have traditionally been a central hub for community interaction, and their declining occupancy can potentially lead to reduced social interactions and, subsequently, diminished economic activity within those communities. Predictions suggest that the vacancy rates could continue to rise if the current trends persist. This paints a concerning picture of the future of the mall industry, particularly for older malls, which often lack the adaptability to meet modern consumer shopping expectations. These malls, struggling to accommodate modern retailing needs, underscore the importance of innovative design and planning to address the evolving preferences of today's shoppers.
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - Los Angeles Bucks Trend with Positive Mall Space Absorption
While mall closures and declining numbers are a prominent trend across the US, Los Angeles has defied the pattern. During the third quarter of 2024, the city saw a positive net absorption of 375,000 square feet of mall space. This positive result is unusual in a time when many major urban areas are experiencing a decline in malls, largely attributed to the ongoing rise of e-commerce and the changing way people shop. It is particularly noteworthy that Los Angeles was the only significant commercial center to register positive mall space demand in Q3, with other markets, including industrial real estate, showing losses. The changes in Los Angeles seem to reflect a broader pattern of repurposing and redevelopment of mall properties. The Westside Pavilion's shift to a research park showcases this movement, highlighting how cities are reimagining mall spaces in the face of evolving consumer behaviour. It reveals a dynamic tension between shoppers' shifting preferences and how cities are adapting their development strategies, particularly in the retail sector.
While the broader US shopping center landscape is marked by declining mall numbers and increased closures, Los Angeles presents a somewhat unusual case. Specifically, the third quarter of 2024 saw a positive net absorption of 375,000 square feet of mall space in Los Angeles, which stands in stark contrast to the overall negative trend seen in other major urban areas. This counterintuitive trend suggests that local economic circumstances or demographic profiles might be influencing the success of certain malls in this region. It's interesting to consider how, for example, entertainment and event-driven mall models in LA may be drawing crowds compared to traditional retail-focused shopping centers in other cities.
It's important to note that the industrial real estate sector in Los Angeles is currently experiencing negative net absorption, which totaled 13 million square feet in the second quarter of 2024. Meanwhile, lease rates for commercial spaces in the region have dropped significantly, close to 22% from the second quarter of 2023. This suggests that the overall commercial real estate environment in Los Angeles is facing some headwinds. This context makes the positive absorption of mall space even more striking and warrants further research to understand the underlying causes.
The Westside Pavilion, a former mall in Los Angeles, offers an insightful example of how mall spaces are being repurposed. Sold and slated to become the UCLA Research Park, the project signifies a shift in the types of development seen within formerly retail-dominant areas. This conversion is not unique to LA; it suggests the mall industry's broader struggle for relevance in an era where e-commerce has become a prominent player.
It's also intriguing that Gen Z appears to be favoring in-person shopping experiences more than other age groups, potentially hinting at a shift in consumer habits that might eventually affect the retail landscape and shopping centers more broadly. The rise of e-commerce continues to put pressure on retail spaces, with traditional anchor store models struggling to stay afloat in many instances.
From a broader view, the overall US shopping center market faces fluctuations in net absorption, influenced by economic conditions. Interestingly, the industrial sector appears to be showing signs of recovery compared to pre-pandemic levels, though some businesses are still hesitant to commit to expanding their physical presence. The situation in Los Angeles seems to demonstrate that a localized resilience in mall spaces exists, a factor possibly influenced by consumer behavior, or a community desire to maintain in-person shopping hubs. This phenomenon is a point of study in the complex evolving landscape of modern shopping and commerce.
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - New Mall Construction Hits Record Low in 2024
The year 2024 marks a historic low point for new mall construction in the US, signaling a significant shift within the retail industry. This downturn comes alongside a concerning rise in mall vacancy rates, which have climbed to around 11% – more than double the rate seen in other retail segments. The trend of mall closures continues its upward trajectory, and many vacant malls are being sold at substantially reduced prices compared to their original purchase cost. Although some malls are being transformed into mixed-use spaces, incorporating residential and office components, the challenges facing the traditional mall model are undeniable. Consumer shopping habits are changing, and the rise of online shopping has had a profound impact on the industry. As urban planners and developers navigate this evolving landscape, the future of the mall remains uncertain, raising questions about how these spaces will be reimagined to remain relevant and vital to their communities.
The US mall landscape has undergone a dramatic transformation since its peak in 1986 when around 25,000 malls existed. Looking ahead, the projected number of operating malls by 2034 is estimated to be a mere 150, hinting at a fundamental shift in how people interact with retail environments. This drastic decline isn't surprising considering the 2 million square feet of mall space demolished in 2022 alone. It's a significant amount—enough to accommodate more than 30 large grocery stores or over a thousand urban apartments. This emphasizes the growing need to rethink the role of mall space, especially in the face of declining shopper numbers.
It's intriguing to note that younger generations, like Gen Z, seem to have a stronger inclination towards in-person shopping compared to their older counterparts. This is a fascinating contradiction in an era where digital shopping has become the norm, posing a significant challenge for mall developers. Mall vacancy rates underscore the challenges faced by this sector. They currently sit at an alarming 11%, over double the rate of other retail spaces, which are around 5.4%. The decline of anchor stores, historically a key driver of mall traffic, has exacerbated this situation. As they leave, foot traffic wanes, impacting the health of the surrounding businesses.
Interestingly, some areas, like Los Angeles, have managed to buck the broader downward trend. During the third quarter of 2024, Los Angeles recorded a positive net absorption of 375,000 square feet of mall space. It's a noteworthy contrast to the prevailing national trend, suggesting that localized economic conditions and perhaps specific consumer patterns in the region might be playing a role.
The rapid decline of malls built as recently as the early 2000s highlights the accelerated rate of change in the retail landscape. The industry is evolving at an incredible pace, and what was once a thriving model can quickly become obsolete. This is partly due to the growth of e-commerce, which now accounts for approximately 20% of total US retail sales and continues to exert a major influence on shopper habits.
Mall owners are looking at alternative uses for their spaces to try and adapt. Some are trying to repurpose them as community centers, wellness hubs, or even office spaces. It's a necessary evolution in light of declining foot traffic and the struggle to maintain large retail footprints. The economic implications of declining mall performance are far-reaching. High vacancy rates negatively impact property owners, surrounding businesses, and local governments, ultimately affecting job markets and community wellbeing. Understanding the shift in consumer preferences and the emergence of new retail models is key to navigating this evolving landscape.
Declining Mall Numbers A 2024 Analysis of US Shopping Center Trends - 25% of US Malls Projected to Close Within 35 Years
The prediction that a quarter of all US malls will likely close over the next 35 years highlights the ongoing struggles within the retail sector. This anticipated outcome stems from a confluence of factors, including the growing popularity of online shopping and the lasting effects of the pandemic, both of which have significantly impacted mall traffic and profitability. Vacancy rates within malls are currently more than double the average for other retail locations, hovering around 11%. This substantial vacancy rate signifies the difficulties mall owners are experiencing in maintaining these traditional shopping centers in the face of consumer shifts. Adding to the financial strain, many closed malls sell for substantially less than their initial purchase prices, creating a surplus of properties that are hard to repurpose. As this decline progresses, it's essential for communities to consider alternative ways to utilize these large retail spaces to ensure they remain economically vital and socially engaging elements within their urban fabric.
Based on various research reports and analyses, a significant portion of US malls are projected to close in the coming decades. Estimates suggest that about 25% of the roughly 1,000 existing malls, which equates to around 250, could cease operations by 2059. This prediction is rooted in a trend that began accelerating in 2017, with an average of 1,170 mall closures per year compared to a pre-2017 average of 581. This change suggests that the mall model is facing increasing pressure, potentially due to factors like the growth of online shopping.
Predictions about mall closures aren't entirely new. In 2017, a Credit Suisse report projected that 20-25% of malls would close by 2022, which, in retrospect, seems to have been fairly accurate. Experts during the pandemic echoed this projection, also estimating that a quarter of malls could shut down by 2022. It appears these earlier projections were not entirely off the mark, although the precise timeline for closures may need revision.
It's important to note that the overall market value of closed malls has been significantly depressed. They tend to sell at prices 43% lower than their initial acquisition cost, which hints at an oversupply of these properties within the market. The high vacancy rates within malls, which averaged 11.4% in 2021, underscore the financial strain on mall owners and operators. These rates are a sign that existing mall space isn't efficiently generating income, impacting property values and owners' ability to invest in improvements or explore new uses.
If the current trends persist, experts foresee a significantly reduced number of operating malls by 2034. Some predict that only about 150 malls might remain operational in the US, potentially further impacting the retail landscape and the role that malls play in communities. This potential future underscores the need to consider how communities will be affected if a significant portion of their traditional shopping hubs disappear. The industry is under pressure to adapt and innovate as consumers shift to alternative shopping models and experiences. The viability of malls appears intrinsically tied to their capacity to adapt and evolve within this changing context.
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