After rebounding to some degree following the Great Recession in the late aughts, shopping malls are in trouble again.
A new study by real estate research firm Reis reveals that the vacancy rate at regional and superregional malls in the United States spiked at 8.6 percent in the second quarter—up from 8.4 percent in the year’s first quarter.
The market hasn’t seen a number this high since 2012; in the third quarter of that year, the vacancy rate in malls climbed to 8.7 percent.
Reis’ study, which was released July 3, was based on a survey of 77 metropolitan areas across the country.
We know why this is happening. Consumers are increasingly shopping online. And retail’s most recent implosions—including the bankruptcies of Bon-Ton and Toys R Us stores that have resulted in hundreds of stores shuttering—paired with the ongoing amputation of stores courtesy of retailers ever-shrinking their square footage (see Sears, Macy’s, and Urban Outfitters), have left gaping holes in shopping centers that operators are struggling to fill.
The major U.S. mall owners, including Macerich and Taubman, understand very well that their centers will need to offer more than retail to stay alive in the coming years (the stakes are high—in May 2018 Credit Suisse predicted 25 percent of U.S. malls will close by 2022).
To stay afloat, shopping center owners have increasingly been signing up nontraditional mall tenants to occupy the cavernous spaces department stores are leaving behind. Walk-in medical clinics, gyms, and play and entertainment centers have been cropping up in malls all over the United States—and Cirque du Soleil could soon be opening one of its mall-based entertainment centers near you.
The one bright spot in the Reis report: Owners of top-tier (or “A”) malls saw rents grow roughly 0.3 percent in the second quarter of 2018. A small but not insignificant silver lining.
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