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The Future of Malls: Was Decline Inevitable?

The Future of Malls: Was Decline Inevitable?

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Yale School of Management
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The Cross County Shopping Center was in Yonkers, in the suburbs of New York City. Built in 1954 as one of the first open air shopping malls and renovated in 2011, the Center captured many of the challenges facing American suburban shopping centers in the 21st century. It was large, a "super-regional," with a total size of over a million square feet. The Cross County had had a successful history, but its future, along with that of other U.S. malls, was far from certain.
The American shopping mall had historically been a symbol of suburban consumerism and a one-stop shop for those living within its radius to gather, eat, and shop. Consumerism, suburban growth, and economic prosperity in post-World War II America led to the budding years of malls. However, in many ways, the seeds of the shopping mall’s downfall were also planted in its early beginnings. In 1954, Congress, hoping to stimulate investment in manufacturing, allowed for an accelerated depreciation process for new construction projects, effectively tax-free money. Money poured into real estate investments. Investors chose not to improve existing malls but instead began bloating the American landscape with new, huge malls. The bumper crop of shopping malls required stores to fill them, which in turn drove venture capital investment for huge stores and mega retailers.
The first major bust that shook the American mall and retail market happened during the 2008 Global Financial Crisis. In 2007 to 2009 alone, 400 of America’s 2000 largest malls were shuttered and sales per square feet in shopping malls across the nation took a nosedive. In 2018, the decline of retail, which is oft referred to as America’s "retail apocalypse," continued. In the first three quarters of 2017 alone, chains reported that 6,800 stores closed, with only 3,000 new stores replacing them. Record levels of store closures came in spite of high domestic consumer confidence, historically low unemployment, and positive growth forecasts for the U.S. economy.
Nonetheless, not all was lost. The face of retail and the future of the shopping mall were pushed to change. Retailers attempted to rethink how best to reach their consumers, and some malls continued to serve their original purpose. Many dying malls were converted to serve other commercial uses, such as office space, educational centers, churches, and even sports venues.

Publication Date: 2019-08-01

Suggested Citation: Jean Rosenthal, Anna Williams, Brandon Colon, Robert Park, William Goetzmann, Jessica Helfand, "The Future of Malls: Was Decline Inevitable?" Yale SOM Case 19-013, August 1, 2019

Keywords: Gravity Model, Evolving Retail, Design Comparison

Teaching Notes: No