Is the day of the shopping mall over? Trends seem to indicate that shopping malls aren't dead, but they are definitely changing. While A grade malls -- the top performers in the nation -- still bring in a lot of business and carry anchor stores easily, B, C and D grade malls aren't faring as well in an environment where shoppers can get most of the typical mall-based goods online.
What does that mean for businesses that have a lot of real estate inventory tied up in shopping mall property? Some companies are selling off lower grade malls so they can concentrate resources on higher grade properties. Others are dividing malls into two separate organizational entities for the same purpose. The goal across the industry seems to be to make high-end malls even more high end, and lower grade malls are increasingly being considered for non-retail ventures.
What does a luxury mall look like? It's a shopping complex that pulls all the big brand names, has a number of anchor stores and boasts dozens of dining establishments. These aren't just retail gatherings with a food court in the center -- some of the larger high-end malls in the country boast 40 or more dining establishments of various quality and feature accommodations for hosting events from fashion shows to art exhibits.
At the other end of the spectrum, mall properties that are not performing or that have already lost anchor stores are being converted to other uses including offices or educational facilities. No matter which direction mall owners go, legal concerns are likely. In addition to all the legal concerns that come with leasing any type of property, mall owners looking to think outside the box might have to deal with zoning or other issues. Working with a real estate attorney who understands shopping mall client concerns can help avoid long-term legal complications.
Source: The Wall Street Journal, "Upscale Shopping Centers Nudge Out Down-Market Malls," Suzanne Kapner, April 20, 2016