Are Malls Going Extinct?

We have been talking about COVID-19 pandemic’s impact on small businesses for quite some time now. As it turns out, some department store executives claim that malls will go extinct in 2021. But why?

What malls are going extinct?

According to Jan Kniffen, a former executive of May department store (which was eventually folded into Macy’s) a third of American department stores is ceasing operations by 2021. He said that the mall was slowly losing ground before. Due to the current state of affairs, it’s losing ground even faster.

Currently, there are about 1,000 malls running in the U.S. today. A majority of these malls are the so-called “B- C- D-” malls, or the ones who bring fewer sales per square foot compared to A++ malls. 

According to Green Street’s reports, there are 380 C- and D- malls out of the thousand. They are susceptible to permanently going under since they do not bring enough sales to maintain the property. C malls on the other hand are not good long term retail centers.

What about the A++ malls?

According to Macy’s chief executive, Jeff Gennette, their malls are going to stand the test of time. This statement was made on top of the news that Macy’s will shut down 125 stores over the next three years due to the pandemic. Gennette says that his confidence comes from the fact that a large share of their stores and sales are in the A++ malls of Green Street. 

Kniffen also added that Macy’s is here to stay at least until 2022. Previously, they were able to secure $4.5 Billion in new financing to soften the blow of the COVID-19 pandemic. The same could not be said for other malls though. J.C Penney is still recuperating from bankruptcy and is trying to emerge as a small business. Stage stores could completely perish if they fail to find a buyer. 

In Coresight research, it is expected that there will be 25,000 store closures this year to be announced by retailers. 55% to 60% of these closures will be in American Malls.