E-commerce Shopping Impacts Rising Mall Merchant Vacancy Rate

by Raymond Pucci 0

Tumbleweeds have been seen rolling across some retail malls that are suffering the highest vacancy rate since 2012. As the Chain Store Age article relates, malls are being hit hard by many store closings as well as growing E-commerce sales.

Malls are the emptiest they’ve been since 2012, when the U.S. economy was still struggling to recover from the last recession. The vacancy rate reached 8.6% in the second quarter, up from 8.4% in the first quarter, as more consumers shifted their shopping online, according to data from real-estate research firm Reis Inc. The highest postrecession vacancy was in the third quarter of 2011, when it hit 9.4%, Reis said.

The shopping slowdown is being felt in all types of brick-and-mortar retail outlets throughout the country. Vacancies in open-air shopping centers, for example, increased during the last quarter in 55 of the 77 metropolitan areas studied by Reis.

The impact is especially severe among strip malls and other neighborhood and community shopping centers, which suffered their worst quarter in nine years. About 3.8 million square feet of space was emptied from April to June, pushing the vacancy rate for this type of mall up to 10.2%, Reis said.

Space has been emptied by a steady decline of some of the most-iconic retail names. Bon Ton Stores Inc., Sears Holdings Corp. and J.C. Penney Co. are among big names that have sharply reduced the number of stores in recent years.

There were over 9,000 stores closings in the U.S. last year, and this year will approach, if not exceed, that number. No doubt mall developers and merchants created a bubble that has been slowly but surely deflating. Successful merchants and malls have learned how to promote the customer experience rather than just a shopping trip. Mobile payment apps and loyalty programs have also played a role in driving store traffic. Look for the shakeout among the large retail chains to continue into next year. Smaller merchants can be winners as they are faster to recognize and adapt to changing consumer buying behavior.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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