Are you addicted to online shopping? Or do you prefer to stroll around and visit your favorite shops at the local mall? Research suggests that soon the latter may no longer be an option.
Shopping mall visitors are dwindling and stores are now emptying out across America. Malls that were once blamed for taking business away from “main street” now face threats from the e-commerce revolution.
Online retail has also affected another industry – commercial real estate. In the last few years, companies like Circuit City, Borders, and Blockbuster were hit by their online competition. Stores like Macy’s, Sears, and JCPenney have shut down storefronts and mall owners are having a hard time finding retailers to replace them. JCPenney announced it would close 33 stores, Macy’s would close five, and Sears announced it’d close its flagship store in Chicago. Retail and real estate analysts say the problem will get worse.
Green Street Advisors, a real estate and REIT analytics firm predicts that up to 15 percent of U.S. malls will fail or be converted into non-retail space within the next ten years.
“The risk of failure for a mall increases dramatically once you see anchor closures,” said Cedric Lachance, managing director of Green Street Advisors. “Their health is very important… and most of them are highly likely to continue closing stores.”
Retail consultant Howard Davidowitz expects as many as half of America’s shopping malls to fail within 15 to 20 years. He also predicts luxury and upscale shopping centers like Saks Fifth Avenue and Neiman Marcus will stay open.
What will happen with the empty retail space? Green Street Advisors predicts ghost malls will be transformed into office space, community colleges, and healthcare facilities.