Recession Relegates Malls to Secondary Status

The shopping mall as it has existed since the 1970s could be driven into a final decline by the current recession.

The problem is two-fold. Many consumers and the retailers that serve them have moved on. Local power centers that developed around discount stores such as Wal-Mart and Target and quasi-department stores such as JCPenney and Kohl’s are more conveniently located and quicker to shop. Indeed, both JCPenney and Sears, keystone stores for many malls, have developed independent formats as shopping centers became less popular and as fewer were built. Studies indicate that core consumers are tired of the store and restaurant choices available in malls. The determination suggests that neither store-based efforts to enhance the shopping environment nor mall-based initiatives to boost entertainment quality are likely to revitalize the typical shopping center.

Not only that, but the credit crunch has hobbled mall operators. With less money available for financing, holds have been placed on new projects and refinancing options have dried up for more aggressive mall operators who took on debt in the real estate boom. New projects were dubious anyway as retailers have cut their expansion plans or even begun closing stores to survive. Among the troubled are fashion apparel retailers who tend to fill a lot of mall space, and, in good times, bring in consumers to browse the latest styles.

In the short term, besides new projects, a lot of secondary malls seem to be destined for the scrap heap. To the degree the recession lingers, major mall operators will be increasingly strapped and they, too, may fall by the wayside, leaving fewer players to try revitalizing the sector. Lifestyle malls, which are smaller, more focused, provide recreation space and offer a wider variety of restaurants, were supposed to be the salvation of the mall, but they are often dependent on the kind of specialty fashion stores that have been hit so hard in the economic downturn. And they face all the financing problems that challenge big regional malls.

Certainly, the mall won’t disappear from the American landscape, but, like the department store that served it as a cornerstone operation, it seems primed for relegation for to a lesser role in retailing, serving particular demographics, among them the oldest and youngest consumers.