Macy’s closures are driving an American mall transformation

Macy’s, long a staple of malls across America, has shuttered 270 locations over the past 10 years. And in February, the retailer said it plans to close another 150 by early 2027.

These closures are driving a She’s All That-like transformation in the mall industry. Macy’s stores are big – typically ranging between 200,000 and 225,000 sq. feet – and owners would be hard-pressed to find a single tenant to fill the whole space, since mall staples like Nordstrom and Belk generally aren’t opening up huge stores like in the past. And many of the fastest growing retailers in terms of store count, such as Dollar General, Five Below, and T.J. Maxx, want to be in suburban strip centers rather than malls, CNBC reports.

This is leading mall owners to pursue other…creative options:

• Stonestown Galleria in San Francisco traded its Macy’s for a Whole Foods, movie theater, sporting goods store, and healthcare facility.
• Tysons Galleria near Washington, DC, replaced a closed Macy’s with entertainment options, including a bowling alley and movie theater, home furnishing stores such as Crate & Barrel, new dining options, and a showroom for EV brand Lucid Motors.
• A former Macy’s near Salt Lake City, Utah, will soon be transformed into a training and practice facility for the NHL’s new addition, the Utah Hockey Club – ice skating rinks and corporate offices included.
• Other ways malls are filling the empty space: New apartment complexes, amusement parks, or activities like pickleball, laser tag, and rock climbing.

Zoom out: A clear dichotomy has emerged in the mall industry in recent years, according to commercial real estate firm Green Street. Namely – top-tier malls, which have higher occupancy rates and lower sales density, are doing fine. Lower-tier malls? Not so much.

Overall, however, foot traffic is on the upswing. Indoor malls and open-air shopping centers have seen foot traffic increase every quarter since Q1 2021, with June’s foot traffic outpacing 2019 levels by 10% and 21%, respectively.

Looking ahead… Expect the weak malls to get weaker, and the strong malls to get stronger. Projections from Anand Kumar, an associate director of research for Coresight, indicate that by 2030, top-tier malls will draw a greater share of total mall spending and more lower-tier malls will either close or be forced to convert more space into non-retail uses.

🏬📈 Bottom line: Reports of the American mall’s demise, like President Biden’s golf handicap, may have been greatly exaggerated. But the times, they are a’changing.