Pandemic accelerates the death of malls

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The coronavirus pandemic has accelerated the closing of malls as people fear venturing into enclosed spaces and touching merchandise that has likely been handled by hundreds of other shoppers, according to an industry expert.

“COVID accelerated the migration to online [shopping], and it’s accelerating the rationalization of the retail landscape, so, more stores will close within the next year or two, and more malls will come down in the next year or two,” said Marie Driscoll, managing director, luxury and fashion, at Coresight Research, a retail advisory and research firm.

Her firm projects that 25% of malls in the United States will close within the next three to five years. That closure projection is based on there being 1,200 malls in the country. If accurate, 900 malls would be left standing.

“We’re over-malled; we’re over-stored in this country,” she said.

Her firm also projects that between 20,000 and 25,000 stores will close this year and that a majority of them, between 55% and 60%, will be based in malls.

Another factor affecting the fate of malls is that more than half of all mall-based department stores will close by the end of 2021, according to Green Street Advisors, a real estate research firm. The pandemic is accelerating the demise of these establishments, too.

Before the coronavirus hit the U.S., Green Street Advisors projected that roughly 300 mall-based department stores would close by the end of 2021. That number is now 1,000 as the disease has wreaked havoc on the retail industry.

Retail sales increased 18% in May, the Census Bureau reported on June 16, after plummeting a record 14.7% in April and 8.3% in March. Still, the sector overall remains roughly 5% off from last year. Department store sales are off by over 20% from last year, according to the Census Bureau.

Department stores account for 60% of mall anchor space and for decades have sold clothing and clothing accessories that have attracted shoppers who would also visit the other, smaller outlets that were located in the same mall.

This combination worked well during the ’70s, ’80s, and ’90s, as malls were a popular weekend destination for families. The mall experience was so familiar that it prompted Hollywood to make several movies based on it, including Dawn of the Dead in 1978, Fast Times at Ridgemont High in 1982, and Mallrats in 1995. The coronavirus pandemic changed the mall experience as people now seek safety while shopping, especially by doing it online.

E-commerce has chipped away at mall retail sales for decades, but the pandemic has accelerated it. Online shopping for clothing and footwear, which are available at the mall, has increased 20% over the past three months, according to Coresight. This increase occurred as states were reopening their economies.

Over the past three months, online shopping increased as people preferred to shop at home. This trend could stick around, especially for those who shopped online for the first time during the pandemic, according to Driscoll.

“The people that never really purchased online before have become familiar with purchasing online in the last three or four months, and there will be some stickiness,” she said. “And while we expect [a return to malls], there are still some people that are concerned about their health and welfare, and they may be reluctant to go shopping and prefer to go online now that they established a new habit.”

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