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Retail

American Malls. Is There a Future?

I do an economic forecast for commercial construction annually. My valued client USG has been my sponsor for a decade now. I get great help to shape my presentations – that go beyond just numerical trends and forecasts to future projections – from the questions I get from the business owners in the room.

Back in 2011 one of them asked me about the future of big box stores and shopping malls. I confessed I wasn’t prepared to answer specifically but brought up the scenario of further gains in online shopping and the emergence of the buying power of Millennials. In the following year I went into a detailed forecast that is coming five years later.

Today the publicity about the loss of retail jobs (60,000 in the miserable March, 2017 BLS jobs report), Amazon’s ascendancy to the top clothing retailer expected this year, and the blighted enclosed malls of America brings the issue to top of mind awareness.
Blurred Mall 123rf
But what I wonder about is the future of those buildings that will go unused. Hundreds of large structures, located conveniently on good traffic arteries, surrounded by vast amounts of asphalt parking lots, and atop valuable real estate are destined for closure. Or repurposing.

It will be interesting to watch imagination and investment turn these properties into something other than what they are now. Early moves include conversion to flexible office space. Google is dabbling in this now in the South Bay Area. There’s plenty of employee parking and probably a food court that can be reopened. That may work in some specific areas but I imagine it’s an interim solution.

But the future might involve innovative uses that are in plain sight. What about a conversion to a “healthcare mall?” A centralized location for clinics, specialties, labs, pharmacies, medical device sales, and maybe even outpatient surgery. It’s almost a mini-hospital without the critical care or the beds. It might also have food that’s actually edible.

A restaurant mall might work in larger metro areas. Because the fastest growing segment of the restaurant sector is “fast casual” this could be formed by anchor tenants that are higher-line fine-dining options surrounded by fast-casual in the smaller spaces and even a food truck presence in an area of the parking.

An entertainment concept might also draw traffic. Multiple film screens/plexes could anchor the mall with gaming niches, paintball courses, indoor sports, electronics retailers, instruction venues, and other options.

I could even see an educational institution taking one of these structures and turning it into new housing for anything from a high school to a tertiary school or combination. Classrooms of various sizes optimized with technology could coexist with larger floor space areas turned to auditoriums, theaters, and sports facilities.

There is also the possibility that retail stores morph into demonstration centers. For the products and buyers that want a hands-on experience or need to make comparisons and selection this service might be an extension of the online provider. Amazon has retail stores now and could extend and widen the model in the future.

If retail continues to convert through market changes and consumer demand these real estate legacies could provide platforms for new uses, environmental upgrades, electronic retrofitting, and fulfillment of societal needs.

The Consumer Christmas 2010

I spent time at the epicenter of American spending over the past few days. The Christmas shopping at Macy’s flagship store in Manhattan was, in a word, tepid.

Don’t get me wrong. The store was busy but large areas were deserted. A store that stays open 24 hours a day is a phenomenon in itself but those wandering the aisles were being attracted to sale racks and less-spendy areas of the store.

It was interesting that many of the fur-bedecked matriarchs leading families very slowly and deliberately through the store’s luxury departments were speaking other languages. A lot of Russian and many Asian languages filled the air as we steered around them.

It’s not surprising. Almost all surveys of consumer behavior in the U.S. show a concentration on reducing debt that is unprecedented. Spenders are coming to grips with the fact that jobs are not multiplying, they’ve got to make do with what they have, and the smartest thing they can do is get out from under credit card and other debt as quickly as possible.

Where was shopping intense in Manhattan? Jack’s Dollar Store located just a few blocks from our hotel. Wall to wall shoppers all the way up to the closing hour.

The most likely scenario for the economy, in my opinion, is a long slow recovery. What I observed falls in line with that. I think a GDP growth near 3% in 2011 will enable the unemployment rate to drop below 9%. Spending will return cautiously. It won’t be for big-ticket items but will begin to bolster support for more indulgent food, some travel, culture, entertainment, and family involvement.

We attended sold-out Broadway shows but there were half-priced tickets available up to curtain time at almost all shows. Movies that you would have to buy tickets for days in advance at prime viewing times were walk-up purchases. Top-rated restaurants were busy but not overwhelmed. On the eve of the Christmas rush I’ve been getting discount and free-shipping (even of the rapid variety) offers on a regular basis.

We’ve moved into an era of moderation and introspection. May we emerge more sober and wiser.