The first shopping mall opened in 1956. From then on, the number of shopping malls grew exponentially each year. From 1970 to 2002, over 800 shopping malls were built in the United States. However, shopping mall growth began to stagnate in the 2000s. Various external factors were developing in the 2000s which may have played a role in the gradual decline of shopping malls, such as growing e-commerce, developers preferring open-air shopping centers, and competition with newer malls. This decline was exacerbated by the 2008 financial crisis. As consumers were struggling financially, retail sales declined. Department stores, which played a large role in bringing in consumers, began declaring bankruptcy and closing their stores. Landlords had trouble securing capital and refinancing debt. All of these factors led to many retail store bankruptcies and closures following the 2008 financial crisis, further propelling the decline of shopping malls.
More recently, the COVID-19 pandemic has again put a significant strain on shopping malls. In March 2020, shopping malls were shut down and would not reopen for many months. For example, some shopping malls in New York were only beginning to partially open in July 2020. E-commerce, which was already growing year-over-year, grew even faster during the pandemic. By the end of the third quarter of fiscal year 2020, e-commerce accounted for 16.1% of all U.S. sales, as compared with 11.8% in the first quarter. Retail vacancy rates are nearing a seven-year high, after major chains announced closures of more than 12,000 stores in 2020. In fact, twenty-five percent of America’s roughly 1000 malls are expected to close over the next three to five years.
Given this long decline, the eventual closure of many malls seems inevitable. If so, what would be the potential impacts on local communities? According to the International Council of Shopping Centers, malls and shopping centers across the country provide $400 billion in local tax revenue annually. Notably, shopping malls may typically be the largest taxpayer in any given municipality. Closures of these shopping centers in different municipalities may translate into not only a significant loss of tax revenues, but also up to thousands of retail jobs. Furthermore, when a shopping mall closes, the various independently operated businesses inside – the nail-salons, kiosks, and other mom-and-pop shops – will be forced to close down or relocate. These closures can cause local communities to wither away. For example, Ben Zeller, a city planner for Madison, WI, said that “[l]onger-term vacancies can sometimes snowball and have the effect of spreading and negatively impacting surrounding areas.”
Since there can be serious negative effects associated with mall closures, some cities have tried providing money incentives to lure retailers in. However, as history demonstrates, traditional retail strategies are failing, so this may be only prolonging the inevitable. Perhaps the solution is for malls to reinvent themselves into a “modern mall.” Of the few malls that are still thriving today, luxury tends to be a shared characteristic. These “elite” malls, which are situated in high-income areas, “host “runway brands”, such as Gucci and Louis Vuitton, catering those who don’t need to scour for deals online.” Still, this does not seem like a plausible path that all malls can follow. After all, most cities do not have a large enough customer base for these “runway brands,” which charge up to $700 for t-shirts. For example, Syracuse, New York, which houses Destiny USA, the largest mall in NY, has a median household income of roughly $38,000. If you are an average family in Syracuse, a single $700 t-shirt would be almost 2% of your annual income.
Another way shopping malls may attract consumers is through providing an “experience.” Deloitte suggests that “[p]rogressive malls are building strategies to create mixed-use spaces that bring together residential, office, entertainment, leisure, health and wellness, and other novel experiences.” Some malls are already adapting based on this idea. Some malls have been reinventing their culinary options: at Pennsylvania’s King of Prussia Mall, the country’s second largest, there are stands selling avocado toast and sushi burritos, while malls in cities from Utah to Louisiana are investing hundreds of thousands of dollars into upscaling their food courts. Other malls have been providing more entertainment: Destiny USA has over 20 entertainment attractions, ranging from laser tag, to a museum, to IMAX. It also currently boasts a trampoline park and has a nature center in development.
The development of these modern malls is still progressing, and there is no concrete data on their overall effectiveness yet. Anecdotally, however, these modern malls seem to be effective in drawing in consumers. For example, Assembly Row in Somerville, Massachusetts frequently had heavy foot traffic when I visited, reminiscent of a shopping mall of the 1980’s. Assembly Row features an open-space area with shops, various restaurants, ample entertainment, luxury apartments, and a trail by the Charles River. Though the “Great American Shopping Centers” that we are familiar with are disappearing, it appears that there may still be hope for the “Great, Modern American Shopping Center.”
About the Author: Spencer Li is a 2L at Cornell Law School. He grew up in Queens, NY and has a business administration degree from University at Buffalo. He worked in retail banking prior to law school and plans on pursuing corporate law in NYC after graduation.
Suggested Citation: Spencer Li, The Great American Shopping Mall: Past, Present, And Future, Cornell J.L. & Pub. Pol’y, The Issue Spotter, October 12, 2021, http://jlpp.org/blogzine/?p=3745.