IKEA is betting that it can save the mall

Ingka Group, the operator of most IKEA stores worldwide, is making a big push to buy malls, betting it can rejuvenate them with its unique format and approach. Or in other words – a future trip to IKEA could also involve an Auntie Anne’s cinnamon pretzel😋.

The strategy: Ingka opened its first mall, or “meeting place” as it calls them, in 1973 in Sundsvall, Sweden, together with an IKEA store. This set the blueprint for expansion; Ingka now has 38 malls in 15 countries, including one in San Francisco that opened last year. It plans to buy more US locations in the coming years.

The strategy underpinning Ingka’s strategy is simple: provide people with a fun space to gather, as well as many reasons to come there in the first place.

• The company anchors each mall location it buys with an IKEA store – but one store can’t support a mall single-handed. For this reason, Ingka looks for malls with strong existing retail tenants and development potential.
• The company in November bought a mall in Brighton, England, for ~$184 million. Brands already operating in the mall included the likes of Apple and Zara, while an empty ex-department store in the same property offered a good location for a new IKEA, according to the WSJ.

This approach is working. Ingka says the visitor numbers at its malls are increasing. For example, the Brighton-located mall saw its traffic nearly double from the year before.

And, since Ingka operates on the Field of Dreams approach (build it and they will come), traffic numbers could keep increasing. The company recently invested ~$65 million to develop new concepts to attract consumers and retailers to its properties, and will eventually roll them out globally.

Big picture: Malls rn are about as popular as positive reviews for Madame Web. Foot traffic to US malls was down 4% on average in 2023 from the prior year, and about 12% lower than 2019 levels, according to Green Street, a real-estate data provider. Plus, many debt-laden mall properties are also dropping in value, stuck in a so-called “death spiral.”

👀 Looking ahead… Could Swedish meatballs and customer-assembled furniture revive American malls? Only time will tell.