The American mall is buzzing and well.
Department stores — which were historically the most important real estate in the nation’s malls — are a unalike story.
Department stores are struggling to compete against new online direct-to-consumer competitors and smaller brick-and-mortar retailers that compel ought to been able to keep up with the ever-changing demand of consumers. That struggle has forced store closures at informal retailer names like JCPenney, Sears and Macy’s, the latter of which recently announced it would close up to 150 set asides.
“The ones that are closing are underperforming or have lost their own way with the customer,” said Michael Guerin, EVP of hire out at Macerich. “The brand is not working for one reason or another. So it’s hardly impactful to us when you have an obsolete situation or a brand cheese-paring.”
Top-tier malls, known as Class A malls, are pivoting toward an experiential model, replacing department stores with grocery assembles, casinos, gyms, ice skating rinks and, in some cases, even residential apartments.
The shift in strategy has been oeuvre. Mall traffic has bounced back to near pre-pandemic occupancy levels, with customers embracing the experience-focused unequalled. Mall owners are also capitalizing on the omnichannel strategy bolstering stores’ online presence in addition to their brick-and-mortar preserves, creating a halo effect for retail sales.
All malls aren’t created equal, however. Lower-tier malls are ambiance the effects of department store closures more acutely as inflation and economic pressures increasingly split consumers into two kinds: luxury shoppers and discount shoppers. That’s also causing a split in the fortunes of America’s oversupply of malls, with affluent consumers collect to higher-end malls, bargain-hunting shoppers heading to strip malls, with business declining in the middle tier.
“Those who are province for the demise of the mall might have been premature. But stepping back, there are probably still too many malls in the realm,” said Haendel St. Juste, senior REIT analyst at Mizuho Securities.
Watch the video above to find out uncountable about how malls survived the death of the department store.