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The Future of Malls

Future of Malls
By: Rachel Antman

Revival vs. Reuse

The last few years have not been kind to malls. First, they faced increasing competition from e-commerce. Then came the pandemic, supply-chain delays, rising construction costs, and inflation. Yet some malls have withstood the onslaughts and are poised to flourish post-pandemic. What factors are influencing strong performance? What options have emerged for owners whose malls are distressed? Several experts addressed these questions.


According to a report from Placer Labs Inc., “top performing malls are working hard to stay relevant by taking risks on new and untested tenants, investing in digital and omnichannel capacities, and getting creative to provide their customers with unexpected experiences that keep people coming back.”

Such strategies align with the observations of Patricia Nooney, SIOR, executive vice president in the Fort Lauderdale, Fla., office of Madison Marquette. She notes that savvy mall owners are diversifying their mix of tenants, enhancing the traditional shopping experience with food and entertainment, fitness/wellness, and medical services. Madison Marquette drives additional foot traffic through events, activations, and a “wildly successful” pop-up program called PopUp & Grow, which enables entrepreneurs to showcase their ideas.

Nooney emphasizes the need to meet customers “where they are at any given point,” giving them the flexibility to buy online or in-store, and the options to arrange home delivery or curbside pick-up. Conrad Madsen, SIOR, co-founder and partner of Paladin Partners in Dallas, endorses this advice. He warns: “You better embrace e-commerce and lifestyle experiences into your mall soon, or you will be ultimately left behind.”


Experiential retail makes a big difference, but even traditional malls offer certain advantages that e-commerce cannot match. For instance, shopping online reduces the chances of finding a perfect fit, notes David Pennetta, SIOR, executive managing director in the Long Island, N.Y., office of Cushman & Wakefield. He adds that online shopping is no longer significantly cheaper than bricks and mortar shopping.

Grant Pruitt, SIOR, president and managing director of Whitebox Real Estate in Dallas, points out that shopping malls are “satisfying thousands and thousands of years of human behavior.” As he explains, humans wish to be around other people, socialize, and gather. The drive for interaction is especially strong today, believes Pennetta. “It was novel sitting on the couch and ordering merchandise,” he says. “Now after being quarantined for two years people want to get out again.”


Despite their competitive advantages over e-commerce, some malls have not been able to overcome the obstacles of recent years. These malls may be candidates for adaptive reuse. “Mall owners that have well-located properties generally have seen success in transforming their properties to alternative uses that are in demand by consumers and users within their local area,” says Jeff Dreher, SIOR, senior vice president in the Louisville, Ky., office of JLL. He notes that a recently listed floor in a suburban mall is generating significant interest for office use.

Madsen sees strong potential for repurposing into residential and industrial assets because of population growth. Conversions into call centers represent another possibility, although, as Pruitt observes, call centers typically require more parking than malls do.

Some mall sites lend themselves to healthcare facilities, but only if the tenants can make use of a huge amount of space, says Bryant Cornett, SIOR, president of DTSpade in Atlanta. He offers the example of Emory Healthcare’s recent lease of a 240,000-square-feet space in a Metro Atlanta mall. That space, which will accommodate 1,600 employees, once housed a Sears. He sees fewer opportunities for physician groups or urgent care centers, which generally require far less square footage.    

Furthermore, Cornett reports that a dental group in a mall in Texas did not fare well, noting that the group’s presence “sort of broke the picture.” But he adds that the consumerism of healthcare is new, and that providers offering elective procedures like Botox or dermabrasion might be a reasonable fit for a mall environment.

Self-storage has emerged as a promising option, especially now that developers are considering conversions into mixed-use facilities with residential components. Nick Malagisi, SIOR, managing director and national director of self-storage at SVN Commercial Realty Advisors in Buffalo, N.Y., authored a chapter on self-storage in the recently released book Vertical Villages: The Magic of Mixed-Use Developments. In that chapter, he points out that although self-storage is unlikely to attract additional foot traffic, it “does serve the needs of the community residents and is certainly a passive, unobtrusive use of a large amount of space and, of course, will provide a very welcome revenue stream to the property owners.” He also notes that self-storage is widely considered to be “recession-resistant.”

Clearly, owners of struggling malls have multiple options to consider. The key for redevelopment is diversification of use, which “provides for a much more resilient cash flow for the developer,” suggests Professor Phillip Richardson, CEO of Black Opal Properties Advisors, Inc., and one of the lead authors and editors of Vertical Villages. The challenge he sees in North America is overspecialization. He states: “We became really good at building malls or really good at building strip centers or really good at building multi-family apartments, but we weren’t good at all at all those things.” Malagisi adds that the mortgage banking industry, until recently, was inclined to support the more specialized assets.

Professor Richardson urges developers and lenders to recognize that real estate is in the middle of an evolution: “It’s extremely important that we don’t try to base our decisions on old thinking or old information.”


Whether mall owners decide to double down on experiential retail or repurpose an asset, they still face significant obstacles. “Rising inflation has made it difficult for mall owners to invest the necessary capital for redevelopment because they are getting hit at both ends of the spectrum,” says Dreher. That spectrum includes higher construction costs at one end and less discretionary spending by consumers at the other.

Yet some investors may wish to add malls to their portfolios. “Malls are good investments right now because they are out of favor,” Pennetta states. And some meet the enduring “location, location, location” criteria. Says Pruitt: “If the location is right and the price is right, I’d have a hard time ever arguing that buying for location is a poor investment."


Bryant Cornett, SIOR

Jeff Dreher, SIOR

Conrad Madsen, SIOR

Nick Malagisi, SIOR

Patricia Nooney, SIOR

David Pennetta, SIOR

Grant Pruitt, SIOR


Media Contact
Alexis Fermanis SIOR Director of Communications
Rachel Antman
Rachel Antman
Saygency, LLC

Rachel Antman is a writer, public relations consultant, and founder of Saygency,  LLC.