Malls have had a rough time in the past few years, with more people choosing online shopping over in-Store shopping. The current pandemic and social distancing measures have only made this worse, causing retailers to question the future of malls. An expert who previously served as an executive at a department store says that by next year, America will likely lose a third of its malls.

The Prediction

The prediction comes from Jan Kniffen, a former executive from The May Department Stores, a retailer folded into Macy’s. Today, Kniffen works as a retail consultant. Previously, Kniffen had predicted that about 33 percent of the malls in America would close by 2030. Recently, he adjusted that prediction, estimating that this will occur next year.

Other Figures

According to Green Street Advisors, a commercial real estate services firm, the United States still has around 1,000 malls in operation.

These spaces are rated by letters, with B-, C-, and D-rated facilities bringing in fewer sales for each square foot than A-rated malls. For an idea of the contrast, a C+ mall brings in around $320 sales per square foot, while this could be as high as $1,000 for A++ malls. Of the 1,000 malls still in operation, most of them are B, C, or Ds. Those with the highest risk of closure are the 380 C- and D-rated malls. Those malls have high vacancy rates and do not have enough sales for property maintenance.

The Reasons

The changes to Kniffen’s prediction, including the dramatically reduced timeframe, are partly due to the coronavirus pandemic.

According to Kniffen, malls have “been losing ground,” and the rate at which they are “losing ground” has increased recently. Kniffen recently told CNBC that he expects a minimum of 20 percent of the interior of malls going and a third of malls disappearing sooner than anticipated.

Input from Retailers

Jeff Gennette, the Chief Executive at Macy’s, recently discussed the situation but framing it differently. According to Gennette, most of the stores that Macy’s will keep open long-term despite shuttering 125 stores in the next three years are in A malls. He said that 51 percent of the stores and 65 percent of sales come from these malls.

The Future of Individual Stores

For many of the retailers that are typically found in malls, the future is also uncertain. Macy’s secured enough funding to last through 2022 at a minimum. However, J.C. Penney is trying to come out of bankruptcy on a smaller scale. Signet plans to close up to 400 jewelry locations, and Stage Stores may have to liquidate. 

Source:

https://www.cnbc.com/2020/06/10/a-third-of-americas-malls-will-disappear-by-next-year-jan-kniffen.html

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