Department stores have been getting clobbered since 2000.
Clothing stores have not kept up with inflation. Covid just hit food services.
The death of the mall is a Blow to the Towns That Depend on Them.
What’s Next?
When a mall goes dark, a community loses more than just a place to shop and grab a slice of pizza at the food court’s Sbarro. In many neighborhoods, the mall is an economic engine, hiring hundreds, if not thousands, of workers and providing a significant amount of dollars to the local tax base.
Malls and shopping centers across the country provide $400 billion in local tax revenue annually, according to the International Council of Shopping Centers, the retail real estate industry’s trade group. And there are about 1,000 malls — both privately and publicly held — still operating in the U.S. today, according to commercial real estate services firm Green Street Advisors.
The acceleration of e-commerce, along with a shift toward more consumers wanting to live downtown instead of the suburbs, has led to fewer people frequenting malls over the years. And as the pandemic hit, malls were boarded up, along with the stores in them. Some, including the Northgate Mall managed by Northwood Retail in Durham, North Carolina, are now closing for good. Former department store executive Jan Kniffen has predicted a third of America’s malls will vanish by 2021.
Malls Are Dying
America’s malls are dying.
“Malls can be redeveloped and released, but it often will never replace the impact [to towns] the mall had in their heydays,” Retail Strategies’ Beasley said.
Many will point a finger at Covi-19. However, the coronavirus is not to blame.
Demographics and Amazon sealed the fate long ago.
Millennials do not care about 10% off or even 20% off at JCPenney or Kohls.
Questions of the Day
- What do aging boomers need that they do not already have?
- Does anyone want to drive anymore when Amazon delivers for free?
30% Failed to Make Housing Payments in June
A study shows Missed Payments Stabilize In June At Alarming 30% Level.
Unemployment Claims Tell a Bleak Story
Continuing claims have now topped the 5 million mark for 11 consecutive weeks, and the 20 million mark for 7 weeks.
For details, please see Continuing Unemployment Claims Tell a Bleak Story
Hugely Deflationary Setup
This is a hugely deflationary setup.
The Fed won’t admit that, but the panic in their actions should be obvious.
Mish
Perhaps as online crushes Malls, smaller, lower overhead retailers that are locally owned will find some breathing room. If so, that might benefit the local communities more than the Malls did. Only a tiny portion of the dollars spent in a Mall find it’s way to the local communities. Mall stores rarely run local ads. They contribute little to local charities and causes. They buy their goods overseas. Any profits are funneled out to the National headquarters.
Retail closures come with a hidden cost to society that the average person fails to internalize. Retail closings will result in lots of other small businesses closing their doors. People often forget that the brick and mortar stores suffer several expenses not fostered upon online companies.
Consumers might someday regret throwing their communities under the bus for the promise of free overnight shipping. The closing businesses, both large and small are often viewed as the bedrock of our communities and with the closing of each one, a little bit of us goes with them. More on why we should support these businesses in the article below.
Cry me a river!
I lament the loss of livelihoods for individuals and local governments, but shed no tears for the empty big box stores.
The Berkshire Mall in Western Mass was repurposed for reinforced concrete bridge span manufacturing. The concrete company expanded its operations from across the road.
When the Dutchess Mall (Dutchess County, NY) closed over 20 years ago, half of it was replaced with Home Depot. The other half was used as college extension centers, which are now closed. The only business still in operation since the 1970’s is the liquor store.
A grocery store was converted into a church.
Malls could be used for indoor agriculture like cannabis and starting crops, or a climate controlled recreation area.
But the immediate closure of malls has more to do with the decrease in demand of existing products and services exceeding the growth in demand for new products and services.
Malls are not designed to be energy efficient. In fact, quite the opposite. Energy inefficiency doesn’t matter at all to the mall owners because much of the energy is billed to the tenants directly (each store has an ac/heat unit, but no control over the temperature setting, and have huge open doors to allow the ac to flow out of the store and into the mall.) The rest of the utilities are billed to the stores indirectly, via CAM charges. Thus, in the end, the tenants pay 100% of the energy charges, and the landlord pays none.
you know they should partner with local govt to get their LOW COST HOUSING they all bark about
Mish’s reply to “Questions of the day” is absolutely correct. Recent inner city riots however will reverse any appeal for urban living. Suburbs and e-commerce are the future.
And changing demographics. Let’s face it you need a vibrant younger population to support malls – 30’s,40’s and 50’s. And that is not happening. Because seniors really do not need anything. But younger people do shop – but not when the future is not secure. And for a lot of them it is scary out there.
I’ve said it first! Mark my words! The only thing malls are good for is converting into homeless shelters. Soon, this will become the norm as malls across the US of A (and Canada, too, eh?) will be campuses for the homeless.
A thought, anyway…
That’s like something out of an 80’s dystopian sci fi movie, with Arnold Schwartzennegger.
I suggested turning the old Sears store here into a Covid overflow hospital, but none was needed, at least, not yet.
The outlook for rats is great.
Once Amazon arrived on the scene, the malls days were numbered. The acceleration towards life becoming digital is made faster by Covid. And now we have word that you can actually get sick from Covid over and over because the body doesn’t easily produce antibodies to it and when it does, they don’t remain or show up on the antibody test. As I said here a few months ago, Covid is a like a mutating cold virus that will be able to kill anyone at any given time depending on the mutation. There will be no vaccine because they’ve been trying out cold virus vaccines for decades with zero effect towards coronavirus or rhinovirus (most cold viruses are of these two families). Covid is the least of our worries from a pandemic standpoint. If Covid-19 mutates into something worse that attacks the entire population the way it does with those over 60, 70 and 80, we are all totally screwed.
since there will not be a true vaccine, beware of whatever shots they will be
offering. Big Pharma still wants the pound of flesh profits they think they are
entitled to. Don’t submit to antibody testing since the results are not verifiable,
and door-to-door health surveys are a clear HIIPA violation.
“a shift toward more consumers wanting to live downtown instead of the suburbs” is false.
The data show no such thing.
For example: http://www.newgeography.com/content/006688-employment-city-sector-challenges-ahead-downtowns
It’s early times.
I have a 22 year old daughter and I agree she doesn’t really care about 20% off at Macy’s. She also orders a lot online. But her and her girlfriends still generally enjoy the physical mall experience too. Especially Nordstrom and other clothing stores. Trying on clothes in person won’t go away.
“So look for property taxes to increase substantially” without any doubt
I think the problem goes well beyond malls. Many of the local government tax models are based on taxing places that bring people together in large groups – malls, office buildings, strip malls, sports and entertainment venues, amusement parks, transportation centers (think airports) and the like. As these sources of revenue wither, with some never to return, there will need to be a new model for local governments to raise revenue or they will have to abandon services. So look for property taxes to increase substantially at a time when the economy is anemic and many are ill prepared to handle the increased burden.
“Many of the local government tax models are based on taxing places that bring people together in large groups”
…
My local government is like many. They LOVE development of any sort. Increases tax revenue and, hence, power of local officials. I’ve seen many cases of variance to existing zoning ordinances that benefit the developer for a pittance of a proffer … making EVERYONES taxes rise to accommodate extra services (schools, LE, etc).
Drive carefully! Traffic citations might be asked to fill the revenue gap.
Here in Texas, they passed a state law prohibiting traffic citations from exceeding 50% of city’s budget, as tickets as a source of revenue was out of hand.
Expect widespread challenges to property tax assessments as real estate prices fall. With declining sales, so also do sales taxes. ZIRP impacts pensions as well… What is a city to do? Cutting personnel requires firing friends and relatives- the primary source of a politicians power. Woe to those in city government!
My next question is… What’s going to happen to the major metro areas that are involved in the rioting and looting? Not only were they under pressure financially before the Covid-19 Shutdown, then forced to shutdown for almost 1/4 of a year and now the riots/looting have further deteriorated their tax base. Not to mention the continued taxation loss due to the ongoing turmoil and then if the Antifa revolution finally subsides these same cities with greatly diminished resources will somehow have to try and rebuild what was destroyed. I’m wondering of some of these businesses and residents throw up their hands & say enough and leave further damaging the tax base in these areas.
In Phoenix, AZ the Metrocenter mall is closing. I know the area, it has deteriorated into near 3rd world barrio conditions. Sadly, this was a nice middle and working class area for many years. https://ktar.com/story/3317614/phoenix-metrocenter-mall-closing-june-30/
North Phoenix in general is looking scary anymore.
Sadly it’s not only Metrocenter, AZ. It’s hard to find an island, anymore.
In Arizona, municipal budgets depend in part on local sales taxes. Eager to boost revenue, cities have been trying to lure shopping malls and big-box stores with ever larger tax breaks and subsidy deals. The problem is particularly pronounced in the Phoenix metro, where neighboring communities compete with one another to attract retail developers.
Recent examples include a $42 million taxpayer subsidy used to build the Chandler Fashion Center, home to chains like Barnes & Noble, Pottery Barn, and The Limited in Chandler; a $50 million subsidy for a new shopping mall in Tempe; a $28 million subsidy provided to Nordstrom by the city of Scottsdale; and a $17 million giveaway for the upscale Towne Center mall in Glendale.
This looks to change as COVID and rioting show the pitfalls of city life… I doubt it’s enough to have any meaningful impact on Malls though.
“Malls and shopping centers across the country provide $400 billion in local tax revenue annually”
…
Ouch.
Malls and Big Strips create their own solar system (of sorts) which other developers (both commercial and residential) play off / tout. As they die developers will be hard pressed to get top dollar prices for their projects and to locate. Increasing risk will dampen projects.
Maybe mausoleums for REIT investors…
what happens? right here: https://www.youtube.com/watch?v=E-LNueq83G8
An early mall to go:
You’re missing a key insight. People despise other people in this country of deep division. Why in the world would you subject yourself to an assault of the senses in a mall when being surrounded by people you despise?