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Never mind Bullock’s — Target is the future of dying malls
Target instead of Bullock’s, Macy’s instead of the Broadway
Horton Plaza
America’s ubiquitous shopping malls are starting to disappear. It’s not surprising, because the mid-to-lower section of the middle class — many malls’ major market — is vanishing. There is even a website that keeps the grim statistics: www.deadmalls.com.
New York’s Citigroup recently came out with a study saying that some malls are stronger than ever while others are hurting. The difference: some malls, called the “A” centers, sell goods to rich and upper-middle-class folks and are doing swimmingly; “B” and “C” malls, catering to that middle and lower-middle class, are struggling. It’s reflective of wealth and income imbalance. The upper 1 percent is getting the big gains, and the upper middle class is doing well, too, but most of the rest are hurting.
In San Diego, Fashion Valley and Westfield UTC (formerly University Towne Centre), which serve the wealthy, are doing fine. But the county’s inflation-adjusted median household incomes this year will not return to levels of 2005–2009, according to forecasts by National University System. Middle-class malls will battle to survive.
It’s no surprise that according to the California State Board of Equalization, San Diego County’s taxable retail sales have not returned to pre–Great Recession levels. Kelly Cunningham of the National University System predicts that inflation-adjusted sales this year will still lag such sales of 2004–2006. San Diegans suffer the old squeezeroo: incomes are 20 percent above the nation’s, but costs are almost 45 percent higher.
In the nation, and in San Diego County, “the middle class is shrinking,” says Cunningham. He fears that a stiff rise in the minimum wage will result in job eliminations, worsening the plight of the middle class. (Others disagree.)
With the middle class continuing to shrink around the nation, some of the B malls, and many of the C malls, will be “repurposed,” says Citigroup.
And what does it mean to be “repurposed”? For ailing malls, it means being converted into community colleges, hospitals, corporate headquarters, churches, condos, or something else. The malls that may be repurposed, or torn down, are generally the ones whose anchor stores cater to the middle and lower rungs of the middle class and are therefore doing poorly. Among the ailing store chains are Sears, Kmart, Macy’s, and JCPenney. Their earnings are sad. They close stores regularly, and each time they do, another shopping center becomes vulnerable.
About 400 of the nation’s 1100 enclosed malls will shut down in coming years, says Jan Kniffen, a leading retail consultant.
Consultant Howard Davidowitz says as many as half of America’s malls will be gone in 15 to 20 years. The United States is more “overstored” — having more stores per capita — than any place else in the world. The United States has 50 square feet of retail space per person. “The next closest country is England with about ten square feet per person,” says Forbes magazine.
Giddy mall construction went on for decades, creating fat profits for developers and worrisome urban sprawl for communities. But nobody sobered up — often the case in real estate development.
Detached discount stores such as Walmart, Target, and Kohl’s have drawn people away from the malls, but even the three of them have been closing stores. These closings, as well as mergers among large retailers, are major factors making daily newspapers walk the plank, too, as advertising has plunged drastically.
Sending many malls to the electric chair is the internet — particularly the online retailer Amazon. According to the United States Census Bureau, e-commerce sales in the first quarter of this year were 7.8 percent of total retail sales. Sales in the first quarter of this year were up 15.2 percent from the same quarter of last year.
Such statistics frighten financial firms that have loaned money to shopping centers and/or their tenants. As Bloomberg pointed out in a headline last month, “America’s Dying Shopping Malls Have Billions in Debt Coming Due.” Bank of America Merrill Lynch says that about $47.5 billion of loans backed by retail properties will be maturing over the next year and a half.
“Lenders are tightening their purse strings as unease surrounding the future of shopping centers grows, with bleak earnings forecasts from retailers including Macy’s Inc. and Nordstrom Inc., and bankruptcy filings by chains such as Aeropostale Inc. and Sports Authority Inc.,” says Bloomberg.
Nordstrom at Horton Plaza
In San Diego, Nordstrom recently announced that it is leaving the downtown Westfield Horton Plaza after 31 years. “We’re just not getting the business that we need to get out of it,” says Jamie Nordstrom, president.
Mainstream media keep chanting that downtown’s Horton Plaza is a success story, but the opposite is true: it has been a flop. Big anchor stores began moving out not long after it opened in the mid-1980s.
Many malls are lowering their demographic targets. Grossmont Center in La Mesa once had Bullock’s, Buffums, and the Broadway appealing to the carriage trade and Montgomery Ward aiming at middle incomes. All are gone. Discounter Target snatched the Bullock’s site. Walmart moved into the Montgomery Ward space. Ailing Macy’s took over the Broadway. Buffums closed down and Oshman’s Supersports, now Sports Authority, occupied the site. Sports Authority has gone into bankruptcy and is liquidating all its stores. Future anchors presumably will be Macy’s, Target, Walmart, and whatever replaces Sports Authority. (Grossmont refused to give information on how it will replace Sports Authority.)
Cunningham thinks some San Diego malls will die in the next ten years. “Many retail centers will continue to struggle unless they can find their own specialized niche,” he says.
A San Diego retailing expert, who didn’t want to be named, says, “Class B and Class C malls are going to die off. Millennials [roughly, those age 14 to 34] today go to Amazon. They don’t believe in spending a lot of money on clothes.” Many are laden with huge debts from their college days. “There’s not a lot of discretionary income in this kind of environment. And then there is the disparity between upper-class and lower-class incomes.”
The retailers appealing to middle-income people will continue to have trouble.
“Stores are in disarray, dreary, it’s not pleasant to be there. Look at Sears, JCPenney, Macy’s — that’s why developers are putting money in Class A malls.”
Here's something you might be interested in.
Never mind Bullock’s — Target is the future of dying malls
Target instead of Bullock’s, Macy’s instead of the Broadway
Never mind Bullock’s — Target is the future of dying malls
Target instead of Bullock’s, Macy’s instead of the Broadway
Horton Plaza
America’s ubiquitous shopping malls are starting to disappear. It’s not surprising, because the mid-to-lower section of the middle class — many malls’ major market — is vanishing. There is even a website that keeps the grim statistics: www.deadmalls.com.
New York’s Citigroup recently came out with a study saying that some malls are stronger than ever while others are hurting. The difference: some malls, called the “A” centers, sell goods to rich and upper-middle-class folks and are doing swimmingly; “B” and “C” malls, catering to that middle and lower-middle class, are struggling. It’s reflective of wealth and income imbalance. The upper 1 percent is getting the big gains, and the upper middle class is doing well, too, but most of the rest are hurting.
In San Diego, Fashion Valley and Westfield UTC (formerly University Towne Centre), which serve the wealthy, are doing fine. But the county’s inflation-adjusted median household incomes this year will not return to levels of 2005–2009, according to forecasts by National University System. Middle-class malls will battle to survive.
It’s no surprise that according to the California State Board of Equalization, San Diego County’s taxable retail sales have not returned to pre–Great Recession levels. Kelly Cunningham of the National University System predicts that inflation-adjusted sales this year will still lag such sales of 2004–2006. San Diegans suffer the old squeezeroo: incomes are 20 percent above the nation’s, but costs are almost 45 percent higher.
In the nation, and in San Diego County, “the middle class is shrinking,” says Cunningham. He fears that a stiff rise in the minimum wage will result in job eliminations, worsening the plight of the middle class. (Others disagree.)
With the middle class continuing to shrink around the nation, some of the B malls, and many of the C malls, will be “repurposed,” says Citigroup.
And what does it mean to be “repurposed”? For ailing malls, it means being converted into community colleges, hospitals, corporate headquarters, churches, condos, or something else. The malls that may be repurposed, or torn down, are generally the ones whose anchor stores cater to the middle and lower rungs of the middle class and are therefore doing poorly. Among the ailing store chains are Sears, Kmart, Macy’s, and JCPenney. Their earnings are sad. They close stores regularly, and each time they do, another shopping center becomes vulnerable.
About 400 of the nation’s 1100 enclosed malls will shut down in coming years, says Jan Kniffen, a leading retail consultant.
Consultant Howard Davidowitz says as many as half of America’s malls will be gone in 15 to 20 years. The United States is more “overstored” — having more stores per capita — than any place else in the world. The United States has 50 square feet of retail space per person. “The next closest country is England with about ten square feet per person,” says Forbes magazine.
Giddy mall construction went on for decades, creating fat profits for developers and worrisome urban sprawl for communities. But nobody sobered up — often the case in real estate development.
Detached discount stores such as Walmart, Target, and Kohl’s have drawn people away from the malls, but even the three of them have been closing stores. These closings, as well as mergers among large retailers, are major factors making daily newspapers walk the plank, too, as advertising has plunged drastically.
Sending many malls to the electric chair is the internet — particularly the online retailer Amazon. According to the United States Census Bureau, e-commerce sales in the first quarter of this year were 7.8 percent of total retail sales. Sales in the first quarter of this year were up 15.2 percent from the same quarter of last year.
Such statistics frighten financial firms that have loaned money to shopping centers and/or their tenants. As Bloomberg pointed out in a headline last month, “America’s Dying Shopping Malls Have Billions in Debt Coming Due.” Bank of America Merrill Lynch says that about $47.5 billion of loans backed by retail properties will be maturing over the next year and a half.
“Lenders are tightening their purse strings as unease surrounding the future of shopping centers grows, with bleak earnings forecasts from retailers including Macy’s Inc. and Nordstrom Inc., and bankruptcy filings by chains such as Aeropostale Inc. and Sports Authority Inc.,” says Bloomberg.
Nordstrom at Horton Plaza
In San Diego, Nordstrom recently announced that it is leaving the downtown Westfield Horton Plaza after 31 years. “We’re just not getting the business that we need to get out of it,” says Jamie Nordstrom, president.
Mainstream media keep chanting that downtown’s Horton Plaza is a success story, but the opposite is true: it has been a flop. Big anchor stores began moving out not long after it opened in the mid-1980s.
Many malls are lowering their demographic targets. Grossmont Center in La Mesa once had Bullock’s, Buffums, and the Broadway appealing to the carriage trade and Montgomery Ward aiming at middle incomes. All are gone. Discounter Target snatched the Bullock’s site. Walmart moved into the Montgomery Ward space. Ailing Macy’s took over the Broadway. Buffums closed down and Oshman’s Supersports, now Sports Authority, occupied the site. Sports Authority has gone into bankruptcy and is liquidating all its stores. Future anchors presumably will be Macy’s, Target, Walmart, and whatever replaces Sports Authority. (Grossmont refused to give information on how it will replace Sports Authority.)
Cunningham thinks some San Diego malls will die in the next ten years. “Many retail centers will continue to struggle unless they can find their own specialized niche,” he says.
A San Diego retailing expert, who didn’t want to be named, says, “Class B and Class C malls are going to die off. Millennials [roughly, those age 14 to 34] today go to Amazon. They don’t believe in spending a lot of money on clothes.” Many are laden with huge debts from their college days. “There’s not a lot of discretionary income in this kind of environment. And then there is the disparity between upper-class and lower-class incomes.”
The retailers appealing to middle-income people will continue to have trouble.
“Stores are in disarray, dreary, it’s not pleasant to be there. Look at Sears, JCPenney, Macy’s — that’s why developers are putting money in Class A malls.”
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