A Strong Shopping Mall Market Requires a Strong Economy From a comprehensive perspective, the shopping mall market remains relatively strong because consumer spending/retail sales increased 3.4% YOY for the first half of 2019. Any increase of more than 3.0% is generally a sign the overall economy is strong. Store closings continue to be a major commercial retail challenge, as more than 7,000 closed during H1 2019, and the year’s total is likely to be 12,000. During early March, Gap, JC Penney and other major chains announced hundreds of closings, many in malls. Retailers and shopping malls must also be prepared for a near-term future that will likely include a shrinking GDP (2.6%, 2019; 1.8%, 2020); an increasing unemployment rate, 3.5%, 2019; 3.8%, 2020); and an increasing probability of a recession.

Finding New Paths to a Better Future Shopping mall owners and management companies continue to respond to consumers’ demand for more experiences, such as upscale dining, craft breweries, entertainment, health & fitness and other alternative mixed-uses, such as apartments and offices. Malls are beginning to benefit from the trend of online-only retailers opening one or more physical locations for BOPIS (buy online, pick up in store), returns, etc. Opening just one such store has resulted in a 37% average increase in Website traffic. During Q2 2019, the Pacific region had the most shopping mall inventory, or 776.6 million square feet, and the largest average asking rent, or $23.80 per square foot. The largest vacancy rate, however, was in the Great Lakes region, at 7.7%.

Funding Sources for Building and Expansion Despite the “retail apocalypse,” investors continue to provide the funding to expand the industry. During Q1 2019, for example, investments in power centers, typically 250K–750K sq. ft. with three or more big box stores, increased 30.4%, the most since 2016. The increase in power-center investments wasn’t sufficient to offset a 4.9% decrease in total Q1 2019 transaction volume. Nonetheless, Cushman & Wakefield reported 6.8 million square feet of new shopping center space was added during 1H 2019. Of that new 1H 2019 shopping center space, 3.7 million square feet were for neighborhood and community centers, which are attractive to investors because new residential developments drive the need for more of these centers.

Consumers Know What They Want When Shopping at a Mall The JLL Research’s report, The Future of Retail Is…, shows why mall owners and investors are focused on developing “evolved-mix” malls, as 37.3% of surveyed consumers want to shop at new and innovative retailers during the next 10 years. 33.4% want more entertainment and dining, with 29.8% wanting family-friendly entertainment (women, 57.4%); 15.1%, adventure-themed entertainment (women, 52.1%) and 14.4%, VR concepts (men, 62.4%). Progressive shopping malls are also becoming wellness destinations and, according to the JLL report, 41.2% of consumers want open spaces with greenery at the malls where they shop, with another 37.4% wanting stores with healthy food and drinks.

Upscale Food Courts Are Generating Foot Traffic The food hall concept has grown from approximately 120 projects during 2016 to an estimated 450 food halls to be opened by the end of 2020. An updated food hall in a shopping mall complements consumers’ expectations of experiences, not just shopping trips. In addition, it is an excellent alternative for new and existing restauranteurs, as a food-hall location is generally less costly to operate. Upscale food halls are projected to increase significantly, but they already paying dividends, as JLL reported during May 2019 that shoppers who patronize these eateries spend as much as 15% more at the mall.

Outlet Malls Are Striving – They Are Less Vulnerable to Store Closings Although outlet malls represent only 1% of all US retail space, they are outperforming the 1,100 enclosed malls in terms of vacancy rate. As of April 2019, outlet malls’ rate was 3.6%, compared to 9.0% for regional and superregional malls. According to some industry insiders, outlet malls have performed better than typical shopping malls because outlet malls don’t have to rely on anchor stores or suffer from their many closures, as has, is and will continue to be the case at shopping malls. Industry analysts conclude outlet malls’ appeal provides consumers with two, somewhat unique benefits: a mix of brand and value and the enjoyment of hunting for unknown “treasures” at bargain prices.

Advertising Strategies As indicated in the table on page 2 of the Profiler, shopping malls with an “evolved mix” of stores, experiences and entertainment are more likely to succeed, so their “evolution” should be a major message in their advertising to realign and revigorated their brand. As more online-only retailers open physical locations (and often in malls), local malls should also promote this opportunity to local, online-only retailers to show support for locally sourced products, and then aggressively advertise these retailers’ presence in the mall. Suggest outlet malls promote themselves as a “treasure hunt,” focusing on lesser-known brands and products and their bargain prices. Create a promotion based on this theme, with a special-discount tag on “treasure hunt” items to award the treasure hunter.

New Media Strategies Shopping malls would be wise to conduct an online survey asking many of the same questions in the JLL Research report, The Future of Retail Is…, as per page 2 of the Profiler to determine how their customers may differ, and adjust their online messages, accordingly. Since women specifically want family-friendly and adventure- themed entertainment at the malls where they shop, malls may want to use Pinterest and create pins based on current and future entertainment venues and events that address women’s wants. Malls can promote their updated/upscale food courts, especially those chef-based, with regular videos as social media postings featuring the chef explaining the latest menu items, a short overview of how they are prepared, the locally sourced products he or she uses, etc.