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Most of us remember the first time we glimpsed a shopping mall. During the heat of summer, they were indoor and air conditioned. They featured retail shopping stores, restaurants, and movie theaters. At the time, they were considered a modern marvel. But today, many have disappeared or are on the brink of demise.
The first totally enclosed mall in the nation was Southside Shopping Center in Edna, Minn. It opened in 1952 and was developed by the Dayton Family, founders of Target Corporation. In the 1980s, 2,500 malls dotted the landscape across the nation. They are now closing rapidly. At present, 700 survive. Estimates are that during the next decade, there will be only 150.
The older ones are rapidly declining in value. They are worth 50 percent to 70 percent less than when the value peaked in 2016. Industry sources report that more than $14 billion of loans collateralized by mall properties will come due in the next 12 months. According to Moody Analytics, many are delinquent. With rising mortgage rates, it will be difficult to refinance them. Some will be liquidated at losses.
But it should be pointed out that all are not in trouble. Newer, well-located malls are performing well. Even these, however, have declined substantially in value since the peak in 2016.
A number of factors are responsible for the demise of malls. Part of the cause is changes in shopping habits along with evolving tastes and preferences. Increased competition from other retail forms and the growth of online shopping certainly contributed. And the COVID-19 pandemic may have been the final nail in the coffin.
The beginning of the demise of the malls started with the closing of department stores that began in 2018. All of them were anchor stores such as Macy’s, JC Penney, Bon- Ton, and Sears. Collectively, they closed 875 stores between 2018 and 2020. As they closed, the center of the malls declined. Experts have noted that the closures accelerated the death spiral of the industry.
What does the future hold for the malls? Of course, no one knows with any degree of certainty. To succeed, some industry analysts maintain that successful operations will have to merge the benefits of online and in-store shopping to provide a unique experience for shoppers. This might involve providing customers an option to purchase items online and pick them up in person. One thing seems certain: the future will be fraught with challenges.
Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean. Email him at wccurtis39 @gmail.com.
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