The Decline of the U.S. Shopping Mall

The popularity of U.S. shopping malls has seen a dramatic decline in the past several years.

They are by no means extinct, but the early signs of contraction are evident (CNN Money, Jan. 19):

The Galleria at Pittsburgh Mills went for $100 at a foreclosure auction Jan. 19. The developers behind the mall … owe about $143 million on the property.

The Pennsylvania mall opened in 2005 but failed to attract robust foot traffic. According to CNN Money, about half of the venue's retail space is dormant. The mall was once valued at $190 million.

Other malls across the country have also seen a dramatic decline in visitors (Business Insider, Aug. 31, 2016, bold added):

The decline in traffic has been stunning: In 2010, there were 35 million visits to malls, according to the real-estate research firm Cushman and Wakefield. By 2013, there were 17 million visits — a 50% decline.

The financial troubles of shopping malls coincides with the planned store closures of major retailers.

Business Insider says Macy's is planning to close 100 stores in 2017 and CVS is aiming to close 70 outlets. Other retailers have multi-year plans to close stores, including American Eagle, Chicos, Finish Line, Men's Wearhouse and The Children's Place.

Sears has also been in financial hotwater. This is from EWI's March 2016 Financial Forecast:

Sears Holdings us a good idea of deflation’s modus operandi. …  In 2005, hedge fund manager Edward Lampert took control of the company. For a time in 2006, the firm moved to invest in marketable securities, derivatives and other financial instruments, but those plans were largely scuttled by its diminishing prospects. Revenues peaked a year later at $53 billion. Since 2007, sales have been down every year.

Since the March Financial Forecast published, Sears stock has fallen significantly:

Sears Holdings Corp

Just in four trading days, Jan. 25 through Jan 30, the price dropped by more than 30%, sending the stock to fresh lows. The price did nudge higher on Jan. 31.

The plan is for Sears to shutter at least 30 Sears and Kmart locations by April 2017.

For those tempted to chalk up the financial troubles of "bricks and mortar" shopping malls to the rise of online shopping, consider this from USA Today (Jan. 27, 2017):

 While online shopping is growing at a rapid rate of 15% a year, it’s still only 8% of all retail sales.

In the meantime, a mega-mall in the New Jersey Meadowlands has been planned and under construction for 15 years and is still not complete. The final price tag is expected to be near $5 billion.

The shopping / entertainment complex has been named the "American Dream,” and is expected to open its doors to the public in the fall of 2018.

Ironically, after years of delay, there's a chance that it will open at an inopportune time.

Sooner or later, the Dow Industrials will turn down from what is now record-high territory. If retailers are having financial trouble now, imagine the scenario when the next serious downturn gets fully underway.

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