Key Findings:
- Regional malls have experienced an evolution over the past 50 years, as the once-celebrated destinations face increasing competition for shoppers and their discretionary spending. Consumer demand for more open-air shopping areas has led to a decrease in the number of new malls constructed and many retailers leaving enclosed malls for these newer centers.
- Department stores have been anchors wherever they were located, whether it was a downtown city block or a suburban regional mall. The dwindling number of these stores creates new challenges when space is vacated and owners look to find new tenants. The challenges in the U.S. retail market were exacerbated by the pandemic in 2020, resulting in further softening of fundamentals throughout the country, prompting mall owners to more aggressively consider alternative uses for their assets.
- Converting vacant anchor spaces at shopping malls into distribution or fulfillment centers in service of e-commerce offers considerable upside as a redevelopment play. In some cases, a full property conversion may be the highest and best use of the property, although the conversion process can be expensive and complex.