Things are not looking good for the American mall. CNBC has reported that U.S. retailers have announced so far this year they are set to close 5994 stores, not even offset by an opening of 2641 stores. Data analytics firm Thasos has also reported that foot traffic is declining in malls peaking last year around 2018 and steadily declining since. Many retailers were able to bring in shoppers through promotional sales, but that means they are operating at a loss with heavily discounted merchandise.

Malls continue to face growing competition from online retailers, which contributes to continuously declining traffic and store closures. Stores have been working on making shopping their more experiential, as consumers, especially millennial consumers, crave experiences over just acquiring more material things.

Stores that will be contributing to a bulk of this year's retail store closures include Gymboree, Charlotte Russe, Victoria’s Secret and Gap, and discount chain Fred’s. Bed, Bath & Beyond also recently announced plans to close at least 40 stores in 2019. Store closures don't appear to be slowing down anytime soon either. "“I expect store closures to accelerate in 2019, hitting some 12,000 by year end,” Deborah Weinswig, founder and CEO of Coresight, said to CNBC. “The slowdown we saw in 2018 seems to have been a brief respite in what’s a steady, long-term trend.”

Malls have been courting brands like Apple and Tesla to open there, because it is believed that they help increase foot traffic, however this has not been the case. It's good news for retail tenants looking for cheap rents, as they are able to negotiate lower priced leases. Malls are also courting digital first brands with a strong following, like Untuckit and Warby Parker.

One thing is for sure, the leasing environment is about to brace itself for a change. Malls aren't necessarily dead, but they will have to rethink and overhaul how they operate, and fast.

 

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