Taubman Centers Inc., an operator of luxury malls, doesn’t have any plans to open new shopping centers after completing its latest one in Florida.
That has The Wall Street Journal asking whether America has built its last major mall as retailers close stores to cope with intensifying competition from e-commerce companies like Amazon.
Taubman built the 862,000-square-foot Mall at University Town Center in Sarasota, Fla., after first planning the project in 2004 and facing delays because of the financial crisis. Its studies of the region found that the population was forecast to grow steadily, driving demand for more retail space.
The upscale mall is doing well with anchor tenants like Macy’s, Saks Fifth Avenue and Dillard’s, and reliable shopper destinations like Apple and Tesla Motors. But the mall may be the last of its kind.
“We have every expectation that not many malls are going to be built, but we didn’t expect this to be the last,” Bill Taubman, chief operating officer of Taubman Centers, which is a real estate investment trust based in Bloomfield Hills, Mich., told the WSJ.
“Appetite for building enclosed malls of more than 800,000 square feet has dried up,” the newspaper reported. “Department stores, once dependable foot-traffic generators, are closing locations amid stiff competition from off-price retailers and the growth of online shopping.”
There are roughly 1,200 malls in the U.S. and some analysts see closures cutting the total to anywhere from 500 to 800.
Credit Suisse predicted this month that up to 25 percent of the nation's malls could close by 2022, USA Today reported. Clothing sales that migrate to e-commerce will dramatically affect shopping malls.
Online apparel sales are likely to soar from about 17 percent of overall transactions now to approximately 35.7 percent in the next 15 years, Christian Buss, a Credit Suisse apparel analyst, said in a report.
Simon Property Group, the country’s biggest mall operator, said the Credit Suisse report isn’t accurate. Simon reported earlier this year that its occupancy rate is 96 percent and demand is strong for its retail space.
"Leasing activity remains solid," Chairman and CEO David Simon told Wall Street analysts.
There are a couple of large malls still in development, with a focus on entertainment like the long-delayed American Dream mall in the New Jersey Meadowlands. It will have 3 million square feet when it’s completed. The Westfield World Trade Center mall in a transport hub that opened in 2016 also is being developed.
Department stores will need to figure out how to reverse the long-term trend of losing business to e-commerce companies and big-box stores in order for malls to bounce back.
“There was a time you had a deeper bench of anchors,” Jeffrey Donnelley, managing director of real estate and lodging equity research at Wells Fargo, told the WSJ. “But now not all of those anchors are in expansion mode, and even if they were, not every site works for them.”
© 2021 Newsmax Finance. All rights reserved.