“The future of American shopping malls is looking increasingly bleak” and “Amazon is crushing shopping malls” reported Business Insider, “Your Local Mall Is Dying. Unless You Are Rich” predicted Bloomberg, “The death of the American Shopping Mall” wrote The Atlantic. Symbols of global consumerism are dying. Will they really die … or change? We envision three potential scenarios for dying malls.
Change or Die
The era of the shopping mall is ending. With the rise of social networks, increasing online shopping, a shift to off-price and specialty retailers, the renewed interest in city centres and a turn from “urbanism for cars” to “urbanism for people”, the suburban car-accessible shopping malls are facing declining numbers of visitors, falling sales and higher vacancy rates. According to eMarketer.com, citing U.S. Department of Commerce data, sales at U.S. department stores declined from $87.46 billion in 2005 to $60.65 billion in 2015. Moreover, sales per square foot dropped by 24% over the past decade, according to Green Street Advisors. As sales per square foot decrease, large retailers are closing the least profitable locations. But unlike downtown shopping streets, where the main attractor can be a monument, an atmosphere or a lively cultural scene, finding substitutes for closed stores in shopping malls is hard. Often impossible. As shopping malls’ business model is based on the monetizing symbiosis between anchor and smaller stores, a shopping mall without either is bound to fail.
Once centres of community life, shopping malls have two options: change or die. Transforming vast suburban areas, nowadays surrounded by highways, is however not an easy task. Bankrupt and emptied, some American shopping malls has been repurposed as hospitals, churches and elementary schools, but cultural activities and social programmes would not generate enough profit to pay for the rent without large and often unjustified public investments, while developing attractive housing would require the whole area to employ a very different urbanistic approach.
There are however alternatives for shopping malls that are ready to change. The success of a shopping mall was a consequence of its ability to answer to social and cultural needs of suburban lifestyles and accompany it with the right business model. In the times of 21st Century post-Fordist flexible production, digitalisation, open innovation, prosumers and co-branding, shopping malls need to once again adapt to the changed social and cultural needs. The architecture of the mall – with covered promenades, meeting spaces and pedestrian-only indoor spaces – might just prove to be the ideal for the modern times as it could foster interaction, networking, co-development partnerships, open innovation and development communities. Open architecture of the shopping mall is unlike silo-like vertical design of central business districts (CBD) an opportunity for co-creation and innovation – whether it be luxurious brands, disruptive technologies or high-tech food.
Scenario 1: High-end brandscape
Not all shopping malls are facing declining sales per square foot. Especially the so called ‘A malls’ with high-end tenants, usually located in affluent, high population areas, are still reporting increasing sales (Fortune magazine attributes the boost for the A malls in the US to the expansion of Apple’s retails stores and opening of Tesla showrooms.) As D.J.Busch, a Senior Analyst at Green Street, explains, “it’s circular. As malls get more productive, they are more in demand from new, growing retailers so it’s a virtuous cycle.” A prospect of A malls with high-end tenants is thus to become even more high-end – with high profile brands, exclusive offers, additional services and luxury hotels. These few remaining malls could embark on new trends in retail where sales are increasingly done online due to competitive cost structure, while brands still invest in brick-and-mortar stores, but use them as showrooms, brandscapes and brand lighthouses.
Scenario 2: Innovation district
Some shopping malls might become places of production, not consumption. Developers and operators might go for a change of the programme and substitute empty stores and shops with non-retail activities, e.g. corporate headquarters, offices, co-working spaces, labs and smaller production facilities. Such example can be observed in BTC City at the edge of Ljubljana (Slovenia). BTC City is one of the largest shopping and entertainment complexes in Europe (total gross area of more than 250,000 m2), heavily visited by visitors from Slovenia, Croatia, Italy and Austria. This former main logistics centre of Socialist Federal Republic of Yugoslavia has been privatised in the 1990s and gradually transformed into a shopping centre, »a city of shopping and entertainment« with more than 3000 businesses and 22 million visitors per year. Yet the rise of online shopping and increase of discount stores’ market shares has forced the management to search for new sources of revenue. Following the quick international breakthrough of ABC Accelerator, largest business accelerator in South-East Europe, ABC Hub with co-working, coaching and teambuilding spaces for start-ups and innovators has been set up. BTC City is also increasingly becoming home to world-renowned companies’ headquarters, e.g. UniCredit Bank, Microsoft, IBM, BMW, MSD, Novo Nordisk and Ekipa2, the subsidiary of the one of world’s largest mobile gaming company Outfit7. New art galleries and showrooms accompany the working spaces, while the management has initiated several sustainability actions (reducing the number of parking spaces, introducing green public spaces, establishing private circular bus line…).
Scenario 3: Urban agriculture hub
Suburbia does not have to be only concrete and asphalt. With increasing global demand for food and rising awareness of environmental degradation caused by industrial agriculture, urban agriculture might become one of the viable options for declining shopping malls. Such a development can be observed outside of Aarhus (Denmark) where a new master plan for the Agro Food Park envisions an agricultural innovation hub, the “Silicon Valley of agriculture”. Despite being mostly greenfield investment, such a development can be an inspiring alternative for empty warehouses and large malls. Denmark’s agricultural innovation hub with 44.000 m2 is already home to 75 companies and 1000 employees and is designed to enhance cooperation between researchers and business, while the design incorporates energy, water and wastewater flows from urban and agricultural lands into one all-encompassing environmentally-friendly cycle.
The future is innovation
Like agoras of ancient Greece, market places of Middle Ages and coffee shops of 18th Century London and Paris, shopping malls were a place community life of Fordist Capitalism in the West. Yet their time is ending. Some will die, some might become upscale, but a majority will have to embark on a new path – a path of fostering interaction, networking, co-development and open innovation.
Image via Flickr