Shopping malls empty out

Recession aftershocks send vacancies to their highest level in more than a decade.

By Kim Peterson Apr 8, 2011 1:35PM
Image: Grocery clerk (© Corbis/SuperStock)Is the shopping mall an endangered species? Significant changes in the economy and in the way we shop are killing off mall stores.

This spring has seen mall vacancies hit their highest level in 11 years, The Wall Street Journal reports. The vacancy rate is a surprisingly high 9.1%. The situation is really miserable at strip malls, where the vacancy is forecast to surpass 11% later this year -- the highest level in 21 years.

Luckily, major mall operators like Simon Property Group (SPG) and Taubman Centers (TCO) have managed to escape this downward spiral. The real problem, the Journal reports, lies in those strip malls that were built in the suburbs during the housing boom. Builders thought houses were coming, so they got out first with sprawling retail sites in developing neighborhoods.

A fine idea, but then the financial crisis hit and all those housing plans ground to a halt. That left a lot of empty storefronts in neighborhoods that never lived up to their potential.

There's another problem. In the past, many of those neighborhood malls did well with a big anchor store, something like a Borders bookstore or a Blockbuster. Both of those chains went into bankruptcy. And remember Mervyn's? I still see floundering shopping centers around the country with an empty Mervyn's space in the middle of them.

Another once-dependable anchor store was Best Buy (BBY), which is in its own identity crisis after losing significant business to places like Wal-Mart (WMT) and Target (TGT).

So can neighborhood shopping centers survive without those anchors? Well, there's one more big problem they're facing: The Internet. Online shopping is a serious threat, accounting for 12% of total spending over the holidays, the Journal reports.

"We will hit a tipping point soon, if we have not already, where online will become so mainstream that retailers will wonder what they need some of these big boxes for, when you have a retail presence in everyone's pocket via your smartphone," one retail analyst told the newspaper.

This is a major change in American culture as well. Losing the shopping mall -- even the smaller strip malls -- removes yet another meeting place and neighborhood center. Already, some cities are turning empty malls into offices and homes. Those are better uses for the land, no doubt, but a little identity disappears along the way.

45Comments
Apr 8, 2011 3:19PM
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The "Ripple effect". As businesses leave the Malls, mall owners raise the rent on those who are left. Kind of like what the government is trying to do with those of us who have a job and or something to tax us on. As time goes on and our personal wealth and or operating capitol diminishes we too close down and walk away. The "Ripple effect".

Another example; Boeing aircraft Long Beach Ca. This facility which use to belong to McDonnell Douglas aircraft is building the last of the C-17 military airlifters. There are presently 6500 employee work on 3 shifts. When they shut down in the next year or so, there will be a tremendous impact in this community. Mostly gas stations and food services. 60 percent of the employees live in Orange county. But people buy gas in Long Beach area and purchase lunches and dinners too. Eventually these businesses will have to adjust. Probably close down too. "Ripple effect:.

To be sure though our government has it all under control.

All planned out. In early 1980’s both political parties endorsed and released “Workforce 2000” plans starting with the Fortune 500 companies. Workforce 2000 and NAFTA is Americas contribution to the new global economy. Jack Welch, then CEO of GE designed the model and the rest of the big leaguers followed in his foot steps. I remember it well working for a large aerospace company in So. Cal.
We attended a four hour presentation on how America was going to change. We were to become a service oriented country. How labor intensive work was going to be out sourced. How Chinas average pay scale was a whopping .35 cents per day. The man hours it took us to build one large airplane would be an equivalent cost to the most expensive BMW motorcar. Were all our stock holder excited. The Demographics of America were also explained. Guess what? The Hispanic communities was going to be the major population in the LA basin area. That’s right. See where we are today. All part of the plan and don’t forget, all endorsed by both political parties. Then the whipshooding began. Jack Welch implemented a theme called, “Keeping the Ideas Coming”. Ref. March Fortune 500 article. With the threat, or inevitable loss of our jobs, he started a manipulation cooptation strategy to pick the employees brains and make them think they could compete and save their jobs/asses. The CEO’s, corporate leaders and politicians are raking in all the benefits.
In 1992 United Auto Workers union, (UAW) predicted that only 4% of the American workers will be represented by a union. Police, fire services and a few more government jobs will be represented to show the world America is still labor friendly.
As Americans Change so to speak and our earning power diminishes Americans will eventually take what they can get. Just like other third world counties did. Its Americas turn to become the stepchild.
And now Obama is bringing in Jeffrey Immelt CEO from GE. Immelt cut his teeth under Jack Welch and Harry Stonesypher. GE was the model corporation which has led to American’s loosing their jobs. Amazing how everything predicted is coming to pass.
Wal-Mart has become the new commissary to America.
So when I hear and read about this new economy BS, remember our government has it all under control. The part I have trouble with is if people are not working and or making half of what they use to make, income tax revenue will drop as well. How dose a tax system expect to sustain and pay for basic services, afford a healthcare program and frequent handouts to the world in trouble?
Apr 8, 2011 3:28PM
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People are closing the stores in the malls because the malls have traditionally soaked retailers for huge rental fees.  When the economy was good and people came to the malls to spend, the retailers could afford big rents.  Now many stores are operating with very thin profit margins, especially the small specialty stores which used to be a mall's lifeblood.  A big anchor store was where the mall made operating expenses, but the smaller shops were profit.  It was win-win, because people used to come to malls to browse the big variety of available retailers.  A bad quarter or two makes the difference between a small store's ability to stay in a mall or being forced to close up shop, and the malls don't seem very interested in negotiating breaks.
Apr 8, 2011 4:08PM
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Really sad. Now people can do everything at home and never interact with anyone, and they wonder why "communities" are dying.
Apr 8, 2011 4:19PM
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It's easy to be dismissive about this but this is a serious thing.  Remember, you may not like the perceived cheesyness of the mall but WHEN THE MALL CLOSES SO DO ALL THE JOBS THAT ARE IN IT.   I know you are saying, those are minimum wage jobs, not all, remember a mall has management so does each store.  And in this ecomony we can't even afford to lose a minimum wage job.  When I was in college and high school I always worked at the mall, the mall helped put me through school.  Buying off the internet is cool but it does not create jobs.   THE REALITY IS THE MALL IS BECOMING EXTINCT AND THIS IS NOT A GOOD THING FOR ALL OF US.   So stop being so 'whatever' about this, this is a huge issue.   Blockbuster closed, Barnes and Noble is closing, these are local jobs going away.  Don't celebrate it, this is bad really bad. 
Apr 8, 2011 3:53PM
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The mall owners are crazy.  They tell the stores within their walls, what times to be open or pay insane fines for each hour they are not open.  The company which owns the mall in my city charges $500 a hour for NOT being open when the mall says to be open.    Does Hot Topic really gain anything by being open at 10 a.m. on a school day?  Our mall owners will chase away any *ma-n-pa shop* by moving them from one location to another with no notice.  They want corporate chain stores only inside their mall.   YAWN.  Boring.

 

Our city has a *local boy* married to a wealthy daughter of a supercenter retail GIANT and he builds little strip malls all over our city.  All the good stores from the mall are moving into these strip malls where you park just outside the door of the actual store you want to visit.  The space rents are cheaper than the Mall as well. The stores are open when THEY choose to be open without any fines.  Customers can get in, shop, and get home faster from the strip malls than from the Mall.

 

The 1980's are finished and shopping is no longer an *activity* to occupy your weekend......we now have the internet to provide us with hours of mindless fun....so why waste the day away roaming at the Mall.

Apr 8, 2011 3:24PM
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 Rather have a mall than a walmart but if we can shut down both maybe the downtown personal experience will make a come back.

 

Apr 8, 2011 3:25PM
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uh... when did going to a plain vanilla Target that looked the same in houston as it does in Indianapolis or Charleston become part of my neighborhood identiy or meeting place?   I don't seem to recall having cozy visits at Kohls or Dicks Sporting Goods with my friends and neighbors in recent times.  Walmart though I'll give you as it looks like we are ALL destined to end up there as customers/employees or both.

 

Apr 8, 2011 3:58PM
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The Dinosaurs here are the mall managers. First "Circuit City" asks for lease reductions, they didn't get them so they went bankrupt and now show up on the internet only. Borders isn't far behind.

 

The mall managers demand a base fee and usually a 7% of sales. This fee has to go down to 3% to reflect the internet "store fronts" that they compete with. The mall managers have refused to lower rents because they need to have junior continue to go to high price private schools.

 

Well the party is over, and the malls are heading to the neighborhood tar pit. Good riddance (I speak from first hand experience from a brother in the industry, who frankly doesn't give a rip about the store owners, he is just concerned about the rent checks being received timely, and just cuts back on servicing the mall so he can keep making his due payments. It's all sick it's worse than the government.)

Apr 8, 2011 3:51PM
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People have no money and can't find decent work for decent wages.  Malls have been over built everywhere, there's too many of them and now that the bubble has burst (the financial bubble, you know, printed or electronic money that has no value) there's no need for so many of them.

 

Let them close and bulldoze them over.  They're wasted space anyway, remnants of a debt fueled economy that can no longer be maintained or supported.

Apr 8, 2011 4:03PM
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As long as the FED gives free money to banks and banks don't pay out interest the 30 million+ retirees with CDs and Savings accounts aren't getting that income so they  aren't buying.
Apr 8, 2011 4:09PM
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Listen up.......i am an Brazilian American.......in Brazil the mall where flurishing when brazil was in debt.........we here in America can over come this...........yes there will be hard times but lets fix it and learn from Countries that were broke and are now emerging in to a super power........We can do it America..........lets just fix it...dont believe the hype
Apr 8, 2011 4:29PM
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Every time I went to the mall I had to put up with unruly  adolescents being rude, making out and just being downright disrespectful! No thanks, I'll shop online,
Apr 8, 2011 3:47PM
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bigger malls in my area (east coast FL) aren't doing too badly.   It 's suburban strip malls that are really empty.    When I moved here 10 years ago (from Canada) I couldn't believe the number of suburban strip malls there were down here - on just about every corner.    And that I believe is the problem - there's just too many of them.  

 

The suburban strip malls mostly don't have a big anchor, just a collection of small mom and pops and maybe a sportsbar.     When the economy went south, so did alot of those mom and pops.    Now we have 2/3 empty strip malls and nobody wants to start up new businesses there. 

Apr 8, 2011 4:49PM
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So... 88% of shopping is still done at stores?  88%! 

 

Maybe mall stores/ strip mall stores should have better advertising and merchandise available to remain competitive with the discount super chains.

 

Looks like another alarmist article, the last paragraph needs to say "Bulldoze the empty buildings and make a park for people to gather."  

 

Nothing to see here, move along people....


Apr 8, 2011 3:27PM
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"Those are better uses for the land, no doubt, but a little identity disappears along the way."

I'm not too concerned about whatever vague "identity" my town has gotten from it's strip malls and shopping malls. As those shopping centers fail, our long-suffering downtown core is coming back to life. That's as it should be, in my opinion. I'd rather my town be known as one with a thriving central business district but a lot of vacant or re-purposed shopping malls on the fringes, than one with thriving peripheral shopping centers but a dead downtown (which is exactly what we had been since most of the shopping centers opened or expanded, way back in the 80's). I don't like the idea of a huge cluster of vacant buildings just sitting around unused, either, but if other uses can be found for them, I think everyone wins...except perhaps the people who own the malls right now. Even THEY might come out ahead, considering current vacancy rates...
Apr 8, 2011 5:04PM
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Mall & Strip Malls:  These are the two biggest reasons that Entrapeneaurs cannot get started.  We have a small business and these institutions all want 5 year leases with a full up payment if defaulted.  In addition some major malls also want to know your sales totals for the year so they can also tack on an additional percentage.  It is really a no brainer why these malls are going empty.  There are plenty of small businesses who would really love to be in a local mall area or strip mall but, it is just not possible.  The leasing agencies are just too greedy as is the city/state governments.  My advice to these institutions is Change Your Dynamic!
Apr 8, 2011 4:29PM
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Ok malls are good for?........Kids! And extensively rich older people who want to impress by purchasing name brands. Go into a 'Macy's' and you will be paying upwards of $60 for a 'Polo' buttondown. Shop online and you may pay less with No shipping. Skip the crowd and the parking lots and the LOONG walk to the store and it will be a no-brainer. The reason this makes news is because Retailers and landlords are crying for money.

 Ever try finding a parking spot on Black Friday at a mall? HEHEHE! Then you know what I am talking about. Malls are for people who want to 'appear' wealthy without having any fricking money.

Apr 8, 2011 4:54PM
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the last paragraph needs to say "Bulldoze the empty buildings and make a park for people to gather." 

 

Excellent idea T.O.T.P.!

Apr 8, 2011 4:32PM
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Our economy and culture continues to evolve.  Do any of you remember when going downtown to the big retail stores was the thing to do. Most who post here and read this are probably too young.  The downtown retail shops closed up when people moved to teh suburbs and started shopping in the Big malls.  The Big Malls started suffering when strip malls started appearing everwhere.  It is evolutionionary.  The internet has brought about a new paradigm and now people like Kim Parsons are making a living talking about the inevitable.  If you want to know what shopping will look like in the future ask your teenagers where they like to buy thing goods and consider the answers carefully.  If you have money invested with Shopping Malls and strip malls I suggest you take it out and invest it elsewhere.

Apr 8, 2011 3:44PM
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Thank goodness. I hope that store owners do well in other locations like down towns and areas people actually want to live, play and shop. Enough with the slabs of cement parking lots as far as the eye can see bordered by ugly strip malls and big-box stores.

It is rare I go to a mall of any sort and wonder at the wisdom of the planning. There are some that center around an attraction or area that humans actually find pleasure in spending time at.

But really, from what I hear - if you want to do well as a mall, you just need to make one that caters to the people with the money. You know, that 2% of Americans that make 50% of America's income. Call it the Millionaire Mall and require a bank balance of at least a million for entry. At least the stores will be targeting the people who aren't living in hard times.

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