Outlook for Malls is Not Good

The sight of store closings and deserted malls is not new, but it appears that the shuttering of stores and closing of malls might get much worse.

According to a report just released by Credit Suisse, 20% to 25% of malls in the U.S. will be shuttered within the next five years.

That type of plunge in malls would be a first in the history of the U.S. During 1970, there were just 300 U.S enclosed malls but that count has increased to today’s 1,211. In fact, even though there have been problems in the retail industry, the mall count has actually nudged up each year.

However, if Credit Suisse analysts are right, the trend will take a sharp turn south. The reasons are not new. People have shifted their shopping habits and are shopping more online than ever before and the trend is estimated to continue growing.

Foot traffic in malls has declined for many years. The new reports says that as malls begin to close, online sales will increase from a current 17% of all retail sales to over 35% by 2030.

Simply put, too many stores exist after years of too many malls being built causing the retail bubble.

Credit Suisse has estimated that in 2017 a new record will be set for store closures of more than 8,600. That is many more that the current record for store closures of 6,200 during 2008, the Great Recession’s first year.

Several chains of department stores that serve as the major anchors for malls are shuttering many stores, including Sears Holdings, which announced the closing of 150 Kmart and Sears locations, JC Penney, which will shutter 138 locations and Macy’s, which is shuttering 68.

The closing are not only department stores. This week Michael Kors the retailer for clothing and accessories announced that it is closing between 100 and 125 stores.

However, not everyone remains convinced the number of stores closing is a bad thing for the retail industry. The industry’s occupancy rates are very high at 93% said one CEO of a shopping center chain. That is the industry’s ultimate sign of good or bad health.

Although every closure of a store remains painful, as a percentage of the overall square footage for retail in the U.S., it is very small.

Even if the way the consumers use today’s malls has shifted, there remains a need for them, said one analyst in the retail industry.