Shopping Malls To Become Extinct?

CNBC Online has a recent article, 7 Bold Commercial Real Estate Predictions, that we find pretty interesting and a great read.  Over the next 25 years commercial real estate will be buffeted by changes in demographics, technology, globalization, economic and environmental realities and a host of other trends.  So what will the Commercial Real Estate landscape look at by 2039?  While we could debate each prediction endlessly, let’s take a look at just the first one and see what you think…

Most Shopping Malls will be extinct.

shopping mall exterior

“The world of the American shopping mall, said Kenneth Riggs, president and CEO of Real Estate Research Corp., “has been a Darwinian environment since the 1990s with the advent of big-box retail and the ‘Wal-Marting’ of the world—and it will stay that way.” In other words, expect malls to continue their decline due to the rise in e-commerce, with only those consistently producing very strong revenues still doing business in 25 years.

“As the J.C. Penney’s and Sears continue to lose market share to online retailing, you’re going to see more dead malls where the anchors go dark and ultimately are worth only the land they’re built on,” said Tom Bohjalian, executive vice president at Cohen & Steers, which was the first investment company to specialize in listed real estate.

Teardowns may not be the only way to capture value in defunct malls, though, said Rick Fedrizzi, president, CEO and co-founder of the U.S. Green Building Council. He predicts that with repurposing, they’ll be a useful resource when our way of life swings back to revolving around more compact communities. “Established places like shopping malls will become like town centers, where people can come together, where their doctors and day care will be, where they can gather after major devastations.””

We agree that e-commerce is likely to grow over the next 25 years, and that some of that will be at the cost of traditional retail. Yet as we have seen over the last several holiday shopping seasons, brick and mortar vs. e-commerce is not a winner take all battle.  The American consumer will ultimately decide which form of shopping they prefer, and we’re betting on a basic American human instinct.

The American consumer likes to put their hands on products, to pile in the car and make a day of it – to have a physical experience when they shop that we feel isn’t likely to change radically in the next 25 years.  And while we may have practiced another basic American human instinct, overbuilding our retail space, that seems like more of a correction than a fundamental change in how we like to shop.

As retailers get more savvy in finding a way to combat the issue of window shopping at brick and mortar stores then getting a better price online, we’ll see better sales in the brick and mortar world.  Some things it’s okay to buy sight unseen, but for most items it is that physical need to spend time with hands on the product why we don’t feel most shopping malls will be extinct by 2039.