How U.S. Malls Survived The Death Of Department Stores

The American mall is alive and well.

Department stores — which were historically the most important real estate in American malls — are a different story.

U.S. department stores are struggling to compete against new online direct-to-consumer competitors and smaller brick-and-mortar retailers that have been able to keep up with the ever changing demand of consumers. And this is causing familiar retailers like JCPenney, Sears and Macy’s to close, the latter of which recently announced it would close up to 150 stores.

"The ones that are closing are underperforming or have lost their own way with the customer," said Michael Guerin, EVP of leasing at Macerich. "The brand is not working for one reason or another. So it’s hardly impactful to us when you have an obsolete situation or a brand close."

Top-tier malls, known as class-A malls, are pivoting toward an experiential model, replacing department stores with grocery stores, casinos, gyms, ice skating rinks and, in some cases, even residential apartments.

The shift in strategy has been working. Malls have bounced back to near pre-pandemic occupancy levels as customers seek out experiences. Mall owners are also capitalizing on the omnichannel strategy bolstering stores’ online presence in addition to their brick-and-mortar stores, creating a halo effect for retail sales.

All malls aren’t created equal, however. Lower-tier malls are feeling the effects of department store closures more acutely as inflation and economic pressures increasingly split consumers into two categories: luxury shoppers and discount shoppers. That’s also causing a split in the fortunes of America’s oversupply of malls, with affluent consumers flocking to higher-end malls, bargain-hunting shoppers heading to strip malls, and little left in the middle.

"Those who are calling for the demise of the mall might have been premature. But stepping back, there are probably still too many malls in the country," said Haendel St. Juste, senior REIT analyst at Mizuho Securities. "There were, you know, last, by most estimates, around 1000 malls a few years back."

Watch the video above to find out more about how malls survived the death of the department store.

Chapters:
0:00 Introduction
Ch. 1. The end of the anchor department store?
Ch. 2. How malls pivoted
Ch. 3. What’s next?

Produced by: DeLon Thornton
Edited by: Tim Hurt
Graphics by: Christina Locopo
Supervising Producer: Jeff Morganteen
Additional Footage: Getty Images

» Subscribe to CNBC: https://cnb.cx/SubscribeCNBC
» Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision

About CNBC: From ‘Wall Street’ to ‘Main Street’ to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

Want to make extra money outside of your day job? Take CNBC’s new online course How to Earn Passive Income Online to learn about common passive income streams. Register today and save 50% with discount code EARLYBIRD: https://cnb.cx/3Iwblnk

Connect with CNBC News Online
Get the latest news: https://www.cnbc.com/
Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC
Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC
Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC
Follow CNBC on Threads: https://cnb.cx/threads
Follow CNBC News on X: https://cnb.cx/FollowCNBC

#CNBC

How U.S. Malls Survived The Death Of Department Stores