Report: Malls Trapped in ‘Awful Cycle’ as Values Plummet

Seven years after their valuations peaked, America’s malls are on the ropes.

As The Wall Street Journal (WSJ) reported Monday (July 31), the country’s older and lower-end malls have seen their values plummet by more than 70% in some cases, with many defaulting on their debts.

It’s a situation PYMNTS has been monitoring since 2016, noting at the time that a new, enclosed mall hadn’t opened in the U.S. in more than a decade.

As the WSJ report says, malls’ bad fortunes were exacerbated by sweeping department store closures that began in 2018, when anchors like Sears, JCPenney, Macy’s and Bon-Ton began shuttering locations.

“It really accelerated the death spiral of the industry,” Vince Tibone, head of U.S. retail and industrial research for real-estate research firm Green Street, told the WSJ. “You start losing department stores, that causes sales and traffic at the center to decline. Then more tenants leave. It starts this awful cycle.”

Instead of malls, many of those merchants are looking to smaller footprints to reduce costs and reignite their focus on the customers.

“Marking a significant shift in retail strategy, major stores determined to adapt to the reality of today’s economic landscape are overhauling their brick-and-mortar approach,” PYMNTS wrote in late May.

It’s a move exemplified by Macy’s decision to shift from the traditional mall format to smaller strip malls after its investors expressed worries that department stores were becoming obsolete. Hence, the retailer’s “Market by Macy’s,” which features a more curated inventory than in their larger locations, centered around apparel, shoes, handbags and beauty items with price tags that match the smaller scale.

Other stores getting in on the trend include Nordstrom, Footlocker and even historically mammoth chains like IKEA and Big Lots.

As for the malls these stores are leaving behind, they may need to take on new life as something else. That could be the fate of Crystal Mall in Waterford, Conn., which the WSJ report uses to illustrate the sector’s decline.

With merchants fleeing that shopping center, officials in Waterford envision the mall becoming a mixed-use site, featuring a hotel, worker housing and perhaps a bowling alley or skating rink to attract teenagers, once the lifeblood of malls.

Or it might become home to a pickleball court. As PYMNTS wrote last month, Picklemall, a startup looking to address the challenges facing malls while capitalizing on the growing popularity of the racket sport, has begun repurposing vacant mall areas into indoor courts.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.