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How U.S. Malls Survived The Death Of Department Stores

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The American mall is alive and well.

Department stores — which were historically the most important real estate in American malls — are a different story.

U.S. department stores are struggling to compete against new online directtoconsumer competitors and smaller brickandmortar retailers that have been able to keep up with the ever changing demand of consumers. And this is causing familiar retailers like JCPenney, Sears and Macy's to close, the latter of which recently announced it would close up to 150 stores.

"The ones that are closing are underperforming or have lost their own way with the customer," said Michael Guerin, EVP of leasing at Macerich. "The brand is not working for one reason or another. So it's hardly impactful to us when you have an obsolete situation or a brand close."

Toptier malls, known as classA malls, are pivoting toward an experiential model, replacing department stores with grocery stores, casinos, gyms, ice skating rinks and, in some cases, even residential apartments.

The shift in strategy has been working. Malls have bounced back to near prepandemic occupancy levels as customers seek out experiences. Mall owners are also capitalizing on the omnichannel strategy bolstering stores' online presence in addition to their brickandmortar stores, creating a halo effect for retail sales.

All malls aren't created equal, however. Lowertier malls are feeling the effects of department store closures more acutely as inflation and economic pressures increasingly split consumers into two categories: luxury shoppers and discount shoppers. That's also causing a split in the fortunes of America's oversupply of malls, with affluent consumers flocking to higherend malls, bargainhunting shoppers heading to strip malls, and little left in the middle.

"Those who are calling for the demise of the mall might have been premature. But stepping back, there are probably still too many malls in the country," said Haendel St. Juste, senior REIT analyst at Mizuho Securities. "There were, you know, last, by most estimates, around 1000 malls a few years back."

Watch the video above to find out more about how malls survived the death of the department store.

Chapters:
0:00 Introduction
Ch. 1. The end of the anchor department store?
Ch. 2. How malls pivoted
Ch. 3. What’s next?

Produced by: DeLon Thornton
Edited by: Tim Hurt
Graphics by: Christina Locopo
Supervising Producer: Jeff Morganteen
Additional Footage: Getty Images

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How U.S. Malls Survived The Death Of Department Stores

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