I’ve been to two different malls twice (5 visits total) and every time busy hard to find parking.
I don’t know what the national trends are (GreenPlease works that stuff professionally, doesn’t he?), but my anecdotal experience is same as yours. There’s a mall in my hometown that was dying slowly for a long time, but in recent years the Macy’s got shuttered ,they put in a brew pub, an upscale arthouse movie theater, updated the grocery store, and then in rapid succession a North Face store, Lululemon and bunch of other overpriced retail shops, and the place appears to be banging every time I’m home. It helps that there’s a Target superstore right next to it too - not technically part of the mall but I think there’s a lot of cross-pollination.
Around the Pittsburgh area there are people at the malls but it doesn’t appear to be near the numbers of the past and there are many more vacancies.
I’ve noticed our local malls also doing seemingly well, but as someone said, there was a shakeout first. I see a lot more anchor restaurants that surround it now, so kind of a piggy back on eating out and mall shopping. But it probably is not the times we are seeing it now, but what happens at the holidays that matter most. Probably the lion share of profits come in those few months, and those are the times I avoid them like the plague…
I’ve been to two different malls twice (5 visits total) and every time busy hard to find parking.
The mall is dead. One of my best friends works for Simon Property. Their assets are positioned well and financially they’re in a good spot but their own internal analysis sees U.S. mall square footage declining by 40% over the next five years. That’s not an analysis they’ve told anyone about, those are by their own metrics. They know what everyone else’s cost basis is, their opex, their finances, what their tenants pay, which tenants are going to survive, etc. So more than anyone else they KNOW who’s going to make it and who won’t.
As an interesting aside, Simon has started buying various retail brands out of bankruptcy. In some cases they are converting leases to secured debt obligations just so they can buy a retailer in bankruptcy. Another thing Simon is doing is they’re deploying cash through third parties to buy mortgages, pieces of CDOs, or whatever other secured debt they can find on assets that they’d like to own. In other words, they’ll look at the portfolio of one of their competitors they’re confident will bite the dust, look at malls in that portfolio they want to own, and then buy whatever senior debt they can on those properties.
Another interesting aside since you’re from the Windy City, the real estate taxes on Woodfield Mall are $45 per square foot. Think about that. If you have a 1,000sf shop you’re paying $45,000/year before you even pay a dime of rent or common area maintenance. That’s NUTS. For some perspective, if you’re in the food business you need your total occupancy costs to be no more than 10% of gross sales. Say a 1,000sf space is a sub shop in a food court. If the occupancy costs were just the taxes they’d need to do $450,000/year in sales to be in the black. That’s 246 $5 foot-longs every day 365 days a year or a sub every 3 minutes if they’re open 12 hours a day.
With that said, retail seems to be doing ok in my neck of the woods (granted I don’t manage any malls). I’m very close to 100% across all of our properties and my fastest rising cost is trash which generally correlates well with businesses.
The labor market for blue collar work down here in FL is crazy tight. Need something painted? That will be 2-3 weeks before you can get anyone to come out. Need an electrician? 2-3 weeks. Need a plumber? 2-3 weeks. Need a GC to start a remodel? 2-3 MONTHS. Need some guys for your landscaping crew? Better pay at least $15/hour otherwise nobody is showing up. I had some electricians working in a retail space today. They worked 6-6 today (and busted ass too) and they told me they’ve been doing that and working Saturdays for the past six months. “Make hay while the sun shines” one of the guys said.
Totally off topic, I’ve noticed a hard bifurcation in the residential real estate market down here. Anything under $450,000 basically sells within 3-5 weeks and anything under $300,000 sells within 2 weeks especially new construction. However, once you’re over $600,000 homes stay on the market for months and once you’re over $1,000,000 homes are staying on the market for well over a year even in really exclusive, upscale areas.
A house came on the market near where I live that I would describe as “irreplaceable”. Perfect location on a lake and a very exclusive golf course, extremely nice house, $2,800,000. My buddy is the realtor so I looked at it for kicks. I know the area well and that community draws that sort of clientele so I figured the house would sell in a few weeks at the most. It’s been on the market for over a year and they’ve dropped the price by $300,000 which is now probably way below replacement cost and that’s before backing out the price of the land. So, yeah, the residential RE market has definitely bifurcated down here.
I’ve noticed our local malls also doing seemingly well, but as someone said, there was a shakeout first. I see a lot more anchor restaurants that surround it now, so kind of a piggy back on eating out and mall shopping. But it probably is not the times we are seeing it now, but what happens at the holidays that matter most. Probably the lion share of profits come in those few months, and those are the times I avoid them like the plague…
Fun fact: “Black Friday” got its name because that was the time of the year that retailers got into the “black” for the year historically.
empty mall music reproduction is popular - this is a good one:
Another interesting aside since you’re from the Windy City, the real estate taxes on Woodfield Mall are $45 per square foot. Think about that. If you have a 1,000sf shop you’re paying $45,000/year before you even pay a dime of rent or common area maintenance. That’s NUTS. For some perspective, if you’re in the food business you need your total occupancy costs to be no more than 10% of gross sales. Say a 1,000sf space is a sub shop in a food court. If the occupancy costs were just the taxes they’d need to do $450,000/year in sales to be in the black. That’s 246 $5 foot-longs every day 365 days a year or a sub every 3 minutes if they’re open 12 hours a day.
This stood out to me as totally absurd, so three minutes of Google-Fu told me that mall’s property taxes were $24 Million a year or two ago, with approx 2.15 million square feet, so closer to $11/SF. Still a really high nut to crack, but not nearly what was stated.
The local mall is the furthest north on the east coast. Bus loads of Canadians even come down to shop there. It’s pretty sad. Rare times I go very few people, empty store spaces. There was some talk of it closing until some group purchased it.
Although I took my daughter there last week to get a gift for a bday party and she commented that it seemed like she was seeing more people there recently.
The mall in our town of 40,000 people is basically dead. But the big box store park is humming. It really is a type of mall. In neighbouring cities of 300,000 people the malls are humming tough to get a parking spot if you go to the mall. I don’t think malls are dead.
Malls are an excellent showroom for Amazon.
The mall is dead. One of my best friends works for Simon Property. Their assets are positioned well and financially they’re in a good spot but their own internal analysis sees U.S.** mall square footage declining by 40%** over the next five years.
But isn’t a huge % of mall sqft taken up by the anchor stores?
Half theorizing here and half asking. I’d think they make up a lot of sqft.
There’s an indoor mall and an outdoor mall within 10 miles of me. Indoor is closing soon and outdoor is always packed, BUT the flagship stores of the outdoor just closed (Nordstrom/Carsons). There’s always a lot of turnover for the smaller shopfronts too. I don’t think people are buying anything in the stores. It’s a nice place to walk the dog and have a drink on a patio.
I’ve been to two different malls twice (5 visits total) and every time busy hard to find parking.
This mall is hopping!
A lot depends on the local environment when it comes to malls. Too many malls and generally good weather makes it tough to keep a mall going. I have seen 3 malls fail in the last few years in the South where a person does not need to trudge through the snow to get a store. All of those malls also had other malls competing with them for customers, so the weakest mall lost the battle.
Here where I am, the weakest mall turned into a thug gallery, with shooting and fighting every week. Two of the anchors were weak too (JC Penny and Sears), so the remaining anchor looked for an alternate location and built a new store in an outdoor shopping area a few miles away, closing its store before the mall closed. Sears imploded about a year before the mall closed and was losing customers, products and sales faster than any retail store I have ever seen. The store was deserted on most weekends before it finally died.
That mall was closed 3 years ago and is completely gone now. In its place is a Dave and Busters, a Twin Peaks (a version of Hooters), an REI, a Top Golf driving range and in the future there will be a small lake, concert venues (multiple) and a bunch of condos, restaurants and clubs. Looking at the people going to the stores and restaurants already open, it will draw A LOT more people than the mall it replaced did for the last 10 years of its existence.
Indoor mall, 1956-2008
The mall died in 2008 and has been in the death throws since. There has been one American indoor mall built since 2006. In 2014, 4% of all US malls were dead (over 40% vacant), 20% had vacancy rates at least 10%. 25% of all malls will be closed by 2023. I’m not part of any retail construction associations, and they usually see the retail world through rose coloured glasses, but they slip in some dire news.
My closest mall is already dead. It has 3 anchors. Last year, they were a Best Buy, a DSW, and a Big Lots. The Big Lots is closed. The only reason to enter is a really good Mexican place in the food court.
The next closest is OK, but one of it’s anchors is now a Reliant chemotherapy center…
On the other hand, two local malls are going great: Providence and Natick. Providence is busy. Natick is upscale, huge, and hard to find parking at - 6 anchors (Macy’s, an actual Lord & Taylor, Neiman Marcus, Wegmans, Nordstrom, and Dave & Busters) and 214 tenants.
It seems like the trend now in this area is the upscale outdoor complexes that also include some office/residential space. Natick as you mentioned plus Dedham Place, Market St up in Lynnfield and a few others. A few smaller indoor malls near me (Meadow Glen in Medford, Woburn) have been bulldozed to make way for larger spots like Wegmans and similar outdoor concepts.
A few smaller indoor malls near me (Meadow Glen in Medford, Woburn) have been bulldozed to make way for larger spots like Wegmans and similar outdoor concepts.
Meadow Glen reminded me (that was the last retail project I did), the outdoor/strip mall is going to survive. Meadow Glen was dead - Kohl’s and Marshall’s were the anchors, and the tenants that were still there weren’t high profit tenants. Amazingly Google Maps still has the layout of the old mall: https://www.google.com/maps/@42.407199,-71.0922457,17.79z
That mall was so dead, it made sense for the developer to bulldoze all of it and drive hundered of piles for a foundation - it’s on crap soil along the Mystic River.
Another interesting aside since you’re from the Windy City, the real estate taxes on Woodfield Mall are $45 per square foot. Think about that. If you have a 1,000sf shop you’re paying $45,000/year before you even pay a dime of rent or common area maintenance. That’s NUTS. For some perspective, if you’re in the food business you need your total occupancy costs to be no more than 10% of gross sales. Say a 1,000sf space is a sub shop in a food court. If the occupancy costs were just the taxes they’d need to do $450,000/year in sales to be in the black. That’s 246 $5 foot-longs every day 365 days a year or a sub every 3 minutes if they’re open 12 hours a day.
This stood out to me as totally absurd, so three minutes of Google-Fu told me that mall’s property taxes were $24 Million a year or two ago, with approx 2.15 million square feet, so closer to $11/SF. Still a really high nut to crack, but not nearly what was stated.
I decided to do some searching myself. Below is a screenshot from the Cook County tax assessor’s website
Something to note is that the mall is broken up into four parcels.
(I’m not uploading the rest of the screenshots)
The total tax bill comes to about $30mil or about $15/sf which is still a far cry from $45/sf. With that said, perhaps my friend was quoting me the tenants’ “effective” tax bill. Keep in mind that most of those leases are NNN so all of the taxes paid on the common area (and all the utilities, insurance, etc.) gets billed to the tenants under NNN terms. So if the mall is 50% retail and 50% common area the tenants’ effective tax psf tax bill is doubled which brings it to ~$30/sf… still a ways from $45. I’ll have to ask my friend where that number came from.
The mall is dead. One of my best friends works for Simon Property. Their assets are positioned well and financially they’re in a good spot but their own internal analysis sees U.S.** mall square footage declining by 40%** over the next five years.
But isn’t a huge % of mall sqft taken up by the anchor stores?
Half theorizing here and half asking. I’d think they make up a lot of sqft.
Yes they do. However, the nature of retail CRE is very much win or lose. You won’t see, long term, malls where the anchors go but the smaller retailers stay. The vast majority of those leases have co-tenancy clauses so when occupancy falls below a certain threshold or a certain anchor leaves all the other tenants have the right to terminate.
So when one says that mall square footage will fall by 40%, that’s not anchors going dark but rather entire malls shutting down.
Long term I think some of the malls that go dark will be repurposed in interesting ways. I know Lockheed Martin is eyeing a busted mall in Oviedo FL (just outside Orlando) as an office/manufacturing campus. I’ve heard of proposals to turn other busted malls into hospitals. However for any of those alternate uses to make sense the price needs to be $0 IMO.