In March, the Miami Herald revealed a new plan to build a 200-acre mega-mall in the suburbs of Miami, complete with an attached hotel and condos, a sea-lion show, and an artificial ski slope. It would be the largest shopping mall in the United States, surpassing Minnesota's Mall of America (developed by the same Canadian company, Triple Five).
Now, there are certainly reasons to be sceptical of this particular plan. American Dream Miami, as it's tentatively known, will cost an inordinate amount of money to build—up to $4 billion—and add to local traffic woes, especially given that the site, near Miami Lakes and Hialeah, isn't served by public transit. Another Triple Five extravaganza-in-progress, in Meadowlands, New Jersey, has repeatedly run aground and needed a state bailout in 2011. (Triple Five didn't initiate that project, however.)
Does it beggar belief that a mall could have a lake with submarines and a ski slope where artificial snow falls 24 hours a day? Sure. But if you're amazed that anyone would bet on the success of a big, flashy suburban mall in the year 2015, you shouldn't be. Contrary to popular opinion, the American shopping mall is not dead. It's very much alive.
If 3.4 percent of malls are dying, then 96.6 percent of them aren't.
We've all read about dead malls and ogled the pictures of them: stopped escalators, crumbling ceilings, and storefronts with the ghosts of old Sears and Foot Locker signs. According to a much-cited analysis by the CoStar Group, almost 20 percent of the country's enclosed shopping malls have vacancies of 10 percent or higher. At 3.4 percent of American malls, vacancy has reached at least 40 percent, putting them in the "dying" category.
The dead or dying mall is a real phenomenon. But all you have to do is invert these figures to get the bigger picture, which looks very different. If 20 percent of malls are in trouble, then 80 percent are still healthy. If 3.4 percent of malls are dying, then 96.6 percent of them aren't. (When the New York Times ran an otherwise nuanced front-page story on struggling malls in January, the accompanying graphic had a top line of 20 percent, wrongly suggesting that a rash of dead malls was a pandemic.)
Yes, a number of malls have closed since the beginning of the recession, but there are some 1,200 shopping malls across the United States. In fact, things are looking up for mall operators. Turning to CoStar's research again, the average mall vacancy rate at the end of 2014 was 5.5 percent, far below the threshold of ill health.
Most malls are owned by a handful of publicly traded real-estate investment trusts (REITs), and the big players who specialize in higher-end malls are doing well. The top three—Simon Property Group, General Growth Properties, and Macerich—have seen their stock prices rise since 2012.
In a recent report, the real-estate research and advisory firm Green Street Advisors predicted that Class A malls—the "destination" malls in major markets—"should perform at a high level for years to come," while Class B malls will remain stable, because they "adequately serve their target shopper in a given trade area." It's the Class C and D malls whose future is dicey, and more of these will indeed likely go dark. There are about 200 malls in this category.
When malls do perish, what's often killing them is demographics. Population decline plus the the ongoing slump in middle-class wages spell trouble in some regions. "Middle America, it's tough," says Andrew Graiser, whose firm A&G Realty Partners advises companies such as Aldo and Panda Express on their real-estate decisions. "I think it's going to be tough for a while."
Malls occasionally die in more populous and affluent places, too. There, the culprit may be competition—not from Amazon or downtown stores, but from another, spiffier mall down the road. In his recent essay "The Twilight of the Indoor Mall," writer Mike Nagel recalled asking a long time worker at a dying mall in Dallas where all the customers had gone."'Better malls,' she said."
CityLab
