5 Ways Malls Are Modernizing for the 2020s
The number of U.S. malls has shrunk dramatically over the past decade, and the last of the carnage has yet to be seen. A 2017 Credit Suisse report estimated that as many as 25% of U.S. malls — or about 275 of 1,100 — would close by 2022, as store closures and e-commerce put many out of business.
Despite this bleak statistic, the mall is far from dead. In fact, the most successful among them are thriving, generating billions of dollars in revenue and attracting visitors from all demographics. What these Class A properties share — apart from prime locations — are landlords who have invested in modernizing them for today’s consumer.
Here are five strategies the country’s top malls are using to stay ahead:
1. Thinking outside the (big) box
Watch on FN
Malls can’t rely on once-stalwart anchor tenants like Sears or JCPenney anymore, but as these and other department stores have shuttered hundreds of locations, some landlords have found creative ways to repurpose the vacant spaces. In April 2020, Simon Property Group, North America’s largest mall owner, will unveil a “lifestyle center” in a former Sears at the Burlington Mall in Burlington, Mass., part of a $1 billion investment in redeveloping the spaces once occupied by the beleaguered chain. The new development’s tenants include a Japanese BBQ restaurant, an acupuncture clinic and a gadget repair shop. Other mall owners have sought out tenants like Whole Foods, Planet Fitness and IKEA — one of the few retailers that still has use for the square footage of a department store — as well as off-price chains such as T.J. Maxx and Ross Stores.
While renovating mall spaces to accommodate smaller footprints or alternative uses is an expensive undertaking, it also paves the way for higher rents and new traffic from incoming tenants.
2. Supplementing shopping with entertainment
In October, the first phase of the American Dream megamall in East Rutherford, N.J., finally opened to the public. The 3 million-square-foot shopping and entertainment complex includes a theme park, a water park, an indoor ski slope and snowboard park, a giant Ferris wheel and an NHL-size ice rink.
American Dream is an extreme example, but many malls today are adding entertainment options to cater to evolving consumer tastes. Their reasoning: These tenants give visitors something that can’t easily be replicated online, whether that’s a virtual reality arcade, a made-for-Instagram pop-up museum or an e-sports arena.
3. Making the food court a destination
Gone are the days when Panda Express and Subway would satisfy most mall visitors; now, owners are adding craft breweries, oyster bars and artisanal sandwich vendors, and they’re handing over the reins of their food halls to celebrity chefs.
Earlier this year, the International Council of Shopping Centers (ICSC) polled more than 1,000 U.S. consumers, and half said they want malls to offer more food and beverage options, ahead of leisure and entertainment venues (40%), medical/health clinics (28%), personal care services (26%) and gyms/fitness centers (25%).
4. Embracing mixed-use
Malls were once considered a stand-in for the town square; in the future, they may be more like towns unto themselves, with residential towers, offices, hotels, and schools built alongside retail spaces. Non-retail or restaurant tenants filled 24.5% of total shopping center space in 2018, according to ICSC, up from 19.2% in 2012.
Even America’s first mall — Seattle’s Northgate Mall — is being redeveloped into a mixed-use property; 60% of the existing structures will be torn down to make room for 1,200 new housing units, four office towers, a 200-room hotel, an indoor fitness center with rooftop pool and a “Central Park” that would unite the complex around more than 100,000 square feet of green space.
5. Courting direct-to-consumer brands
While physical retail was once anathema to digitally native direct-to-consumer brands, most startups have since realized the value of having a brick-and-mortar footprint. For shoe companies in particular, stores can drive conversion and reduce costly returns by offering customers a chance to try on the product. For malls, meanwhile, buzzy brands that can’t be found elsewhere are key to bringing in millennial and Generation Z consumers.
“[Developers] want those retailers that have great product, great service and great experience,” Doug Healey, EVP of leasing at Macerich, told FN in February. “The brands who just naturally do it well — because that’s who the millennials and Gen Zers grew up with — are the digital brands. That’s why we’re doing deals with Allbirds, Untuckit, Morphe and Peloton.”
