The American Shopping Experience has changed over the years with people abandoning in person shopping to internet shopping. What has evolved with the use of the internet is major malls and stores closing their doors and increases in warehouse shopping via the internet. Some History An Austrian-born émigré and architect in 1948, Victor Gruen was stranded on an unexpected layover in Detroit. He toured the streets of greater Detroit to pass the time observing what he would later cast as “a garishly advertised parade of filling stations, hot dog stands, department stores, snack bars, liquor stores, supermarkets, chain stores, used-car lots, and funeral parlors.” He considered suburban streets like these chaotic and would later call them “avenues
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Bill Haskell considers the following as important: Hot Topics, Shopping Malls, Stores, US EConomics, WSJ
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The American Shopping Experience has changed over the years with people abandoning in person shopping to internet shopping. What has evolved with the use of the internet is major malls and stores closing their doors and increases in warehouse shopping via the internet.
Some History
An Austrian-born émigré and architect in 1948, Victor Gruen was stranded on an unexpected layover in Detroit. He toured the streets of greater Detroit to pass the time observing what he would later cast as “a garishly advertised parade of filling stations, hot dog stands, department stores, snack bars, liquor stores, supermarkets, chain stores, used-car lots, and funeral parlors.”
He considered suburban streets like these chaotic and would later call them “avenues of horror.”
His belief was the messy streets and the desire to have plentiful shopping nearby could be addressed by bringing the downtown department stores and surrounding shopping districts to the suburbs. The thought was to develop a centralized shopping area. Gruen was the first to do such with his design of Northland Center bringing Hudson’s out of downtown Detroit establishing it as the anchor department store.
Some More History
Northland Mall in Southfield Michigan was the first planned Shopping Mall opening in 1954. It was built by J.L. Hudson Company. Hudsons store was the anchor store along with three others of what I would call anchor stores and consisting of JCPenney, Kohls, and Wards. The mall had ~90 smaller stores besides Target, and T.J. Maxx. Hudsons was later absorbed by Marshall Fields and then Macys. With the closing of Macys, the mall was eventually abandoned.
Northfield Mall was an open air Mall. was later enclosed (1975), and grew to 1.5 million square feet on two levels. In 1998 with the opening of Auburn Michigan’s Great Lakes Crossing Outlets, Northland Mall’s popularity was declining. Wards closed in 1998. JCPenneys followed, Hudsons became Marshall Fields which became Macys,
The Death of Malls?
This is interesting. Fifteen hundred malls reflecting Gruen‘s (or Jerde’s) models were built between 1956 and 2005. In the 1980s, films such as Fast Times at Ridgemont High and Bill and Ted’s Excellent Adventure firmly positioned them in popular culture as places to see and be seen. Surveys in the 1990s were showing Americans by and large no longer saw shopping as a leisure activity. The average number of hours consumers spent in a mall per month went from 12 in 1980 to just four in 1990.
Why the decline?
Observers point to at least three potential causes.
First, there were too many malls. Even today, there is ~ 24 square feet of retail space for every American which is much more than found in other countries.
Secondly, increasing internet online shopping abilities gives greater access to far more items than stores. Shoppers were experiencing more products availability, easier purchases, and greater browsing experiences.
Third, stores like Macy’s, Dayton’s, or Hudson’s were what brought shoppers into the malls and were abandoned by middle-class consumers. Shoppers were turning to more budget-friendly stores (Target and Kohl’s) during the Great Recession. A recent WSJ article.
Local Malls, Stuck in ‘Death Spiral,’ Plunge in Value, WSJ, Kate King, July 31, 2023
WATERFORD, Conn.—Crystal Mall’s parking lots used to be so crowded, parents would line up to drop off their teenagers near one of the entrances rather than search for a spot.
Now, the vast stretches of cracked pavement surrounding this 1980s-era regional mall on Connecticut’s coast have more weeds than cars. Valued by an appraiser at $153 million as recently as 2012, Crystal Mall sold in June for just over $9.5 million in a foreclosure auction.
Waterford’s top elected leader, First Selectman Rob Brule, who grew up in this working-class town and described the mall as the social centerpiece of his youth.
“To look at it now, it’s disheartening.”
Crystal Mall’s cut-rate sales price shows how rapidly the value of America’s regional malls has fallen in recent years due to changing shopping habits, competition from other retail and the rise of online shopping.
Older, low-end malls are worth at least 50% and in some cases more than 70% less than they were when mall valuations peaked in late 2016, said Vince Tibone, head of U.S. retail and industrial research for real-estate research firm Green Street.
Now, as more than $14 billion of loans backed by these properties comes due in the next 12 months, according to Moody’s Analytics, struggling malls are defaulting on their debt. With mortgage rates up sharply, refinancing that debt will be more challenging and expensive.
About a fifth of all malls financed through commercial mortgage-backed securities are underwater, meaning the properties are worth less than the loans they back, said Kevin Fagan, head of commercial real-estate economic analysis for Moody’s.
In some cases, they are worth a lot less. Crystal Mall’s former owner, Simon Property Group, stopped making payments on $81 million in outstanding CMBS debt during the pandemic and last year handed back the keys to the property it had owned since 1999.
The loan, which was included in the CMBX 6 index shorted by famous investor Carl Icahn, is expected to liquidate at a $70 million loss, or about 87% of the outstanding balance, according to Moody’s.
Similar stories are playing out across the country. In Indiana, Muncie Mall backs a $31 million loan but is worth only $6 million after a March appraisal, according to data provider Trepp. The 52-year-old mall was appraised at $73 million nine years ago and nearly fully occupied as recently as 2018.
Woodbridge Center, a 1.1 million-square-foot mall in central New Jersey, was appraised at $86 million earlier this year, a 76% drop from its last prepandemic appraisal in 2014, according to Trepp. The mall is in foreclosure on two CMBS loans, with outstanding balances totaling nearly a quarter-billion dollars. Senior managing director at Trepp, Manus Clancy.
“We’ve seen dozens and dozens of malls liquidated at losses or had their values cut.”
Not all malls are on the brink of disaster. Newer, well-located properties with strong tenant rosters are generating healthy foot traffic and returns for investors. But even these high-quality malls have declined in value by an estimated 50% since 2016, Tibone said, making malls one of the worst performing commercial real-estate sectors over that period.
Widespread department-store closures beginning in 2018 hastened malls’ decline. Large mall anchors like Macy’s, Bon-Ton, JCPenney and Sears closed about 875 department stores between 2018 and the end of 2020, according to Green Street, compared with a combined 175 in 2016 and 2017. Tibone . .
“It really accelerated the death spiral of the industry. You start losing department stores, that causes sales and traffic at the center to decline. Then more tenants leave. It starts this awful cycle.”
The death spiral at the Crystal Mall started in 2018, when anchor tenant Sears declared bankruptcy and announced plans to close. Macy’s shut its location three years later. Overall revenue at Crystal Mall declined 39% between 2018 and 2022, while expenses fell only 10%, according to Trepp.
“All the stores used to be open, and everything used to be nice and beautiful,” said Melissa Rodriguez, 40 years old, standing outside the mall’s food court one recent afternoon.
Now, many of the shops have closed. One of her favorite stores, Bed Bath & Beyond, is shutting its location after declaring bankruptcy earlier this year. Before the pandemic, Rodriguez said, she often visited the mall twice a week but now comes only once a month.
“It’s not like before,” she said.
Christmas Tree Shops, which shared an anchor space with Bed Bath & Beyond, is also closing following bankruptcy. Once those retailers vacate, JCPenney will be the only anchor tenant left at Crystal Mall.
Brule, Waterford’s first selectman, said he would like to see the property redeveloped into a mixed-use site. He envisions a hotel for tourists visiting nearby Mystic and housing for local firefighters and teachers as well as employees of the local submarine manufacturer, General Dynamics Electric Boat. Maybe a hockey rink or a bowling alley, somewhere for the town’s teenagers to gather.
“That’s what this property could be,” Brule said.
It is unlikely these dreams for Crystal Mall will be realized under its new owner, New York-based investment firm Namdar Realty Group. A company executive told Brule during an introductory call that it doesn’t redevelop properties, Brule said.
Namdar Chief Executive Igal Namdar said the company plans to implement an “aggressive leasing strategy to attract a mix of national and local tenants” to Crystal Mall.
The Economic History of the Shopping Mall and Its Future (Yes, It Does Have One), Richmond Fed, Matthew Wells July 2022.