The biggest problem facing U.S. malls is under-performing retailers, Taubman Centers COO Bill Taubman and other experts told Bloomberg in conjunction with this week's annual convention of the International Council of Shopping Centers.
According to real estate experts who spoke with Bloomberg, the rise of e-commerce and changing consumer tastes pose less of a threat to the future of the American mall than retailers that are unable to respond to those challenges.
The strong American dollar is triggering a drop in tourist visits to metropolitan shopping districts, experts said. Malls that depend on tourists from Europe and Latin America are struggling more than others, although Chinese tourism remains consistent, Taubman said.
Bloomberg’s round of interviews with mall executives and others attending the International Council of Shopping Centers annual convention paints a bleak picture of failures to respond to the changing retail landscape.
Matt Lougee, a senior vice president at DDR Corp., which owns shopping centers across the U.S., told Bloomberg that T.J. Maxx and Marshalls owner TJX Cos. is showing the world that e-commerce isn’t the only channel capturing consumer dollars. “Those dollars are going somewhere,” Lougee said. “They went to a different channel, not necessarily the Internet.”
That jibes with Simon Property Group chairman and CEO David Simon's remarks in a conference call with analysts last month. Simon also pushed back against the widely-held notion that American malls are dying and said, “The Internet is not the panacea.”
In fact, Simon seems exasperated with the suggestion that the American mall is doomed. “If it were up to the media, malls would have already been extinct,” he said. “Demand is fine. Properties are getting better. We've got supply and demand in our favor.”
Mall owners are also frustrated because investor wariness with many retailers—Macy’s, Nordstrom, Kohl’s and Abercrombie & Fitch among them—is bleeding into investment attitudes toward their companies.
But mall and other property owners that lease to retailers should see the need to replace shuttered stores as a routine part of their business, Vereit Inc. CEO Glenn Rufrano said. “Retailers will always lose space, not because they are retailers, but because they are bad merchants,” he stated, according to Bloomberg.
While America currently has about 1,100 enclosed malls, retail analyst Jan Kniffen recently said on CNBC’s “Squawk Box” that number should be around 700. “The top 250’ll do fine, and the rest of them are going to struggle,” he noted.
Kniffen, CEO of J. Rogers Kniffen Worldwide Enterprises, believes e-commerce sales will reach 50% of apparel sales in a dozen years or so, and that brick and mortar retail will have to adjust by closing stores. He called Amazon the “biggest gainer in apparel.” Kniffen also said that the U.S. is the most over-stored country in the world.