Are malls becoming extinct? Column

Neil Howe | USATODAY

While the financial media are wringing their hands about a year-over-year decline in Black Friday retail sales at America's shopping malls this holiday season, few are mentioning a yet gloomier reality: Many of the malls themselves will soon be shutting down.

According to one estimate, 10% of the nation's 1,000 enclosed malls will fail by 2022. Many are currently struggling with vacancy rates of 35% to 50%. Malls are one more reflection of an increasingly bifurcated economy. Prosperous malls are doing better, while struggling malls (which is to say, most of them) are doing worse.

High-end shopping malls — those catering to households with annual incomes exceeding $100,000 — have largely been insulated from the recession. Since 2001, these malls have reported 60% same-store sales growth among upscale tenants such as Apple and Bloomingdale's.

Meanwhile, lower-end malls have struggled to retain middle-income shoppers. Under financial stress, the beleaguered middle class has traded down from the Gap to Walmart. To stay afloat, these malls are now leasing vacant store space out to non-traditional tenants, including churches and health clinics. Middle- and low-income shoppers now prefer free-standing establishments anchored by several big-box stores, including discount chains such as Target, warehouse clubs such as Costco, or "category killers" such as Best Buy.

Middle-income malls also face another looming pressure: technology. From online to mobile shopping, these malls are losing big in the zero-sum holiday shopping season.

Changing generations

But there's more to this story than the ailing economy and (perhaps) the slow demise of the middle class. There is a generational story behind what's happening to shopping malls. And if you want to know how it will end, you have to pay attention to each generation's role.

Sixty years ago, when the G.I. Generation came home from World War II and built the suburbs and interstates, malls were the gleaming symbols of America's future.

What most impressed the G.I.s (and the Silent Generation who succeeded them) about malls was their enormous efficiency: They brought thousands of brands together and lured customers from the city into suburbia to get their shopping done under one roof.

Then came suburban Boomers, who grew up with these newly minted malls as kids. As they matured, many Boomers soured on what they regarded as the soulless and artificial consumerism of malls and began to champion what business author Joseph Pine calls the "experience economy" — turning stores and restaurants from mere retail outlets into places that mean something (think Rainforest Cafe or Build-a-Bear Workshop or L.L. Bean). That thinking not only inspired more stores to include a "tourism" component, but it also drove the surging popularity of lifestyle centers in the early 1990s. Lifestyle (or town) centers — unlike traditional enclosed malls or strip shopping centers that face parking lots — are usually open-air, landscaped, walkable mixed-use neighborhoods combining business, retail and leisure activities.

Mallrats to other hangouts

These changes meant that Gen Xers never saw the mall as a place to shop. Instead, the mall was more like Disney World: You could see a movie, grab lunch, and even visit an amusement park. It was the perfect hangout for teens and young adults (who were immortalized in Mallrats).

But Xers soon changed the mall scene. This strapped-for-cash generation helped popularize "category killers" and was the first to adopt online shopping. Millennial teens who arrived in the late 1990s began to show less interest in malls in part because their parents deemed malls too dangerous. According to Monitoring the Future, an ongoing study of young people, the share of 17-year-olds who "never" visit the mall or visit only "a few times a year" jumped from 19% in 2003 to 29% in 2009.

So where does the mall go from here?

The mall will remain a unique place for people to meet and socialize face to face. But as lifestyle centers become more popular and the wealthier Silent and Boomer generations age, poorer and technology-friendly Gen Xers and Millennials will be less interested in these retail graveyards.

Could there be a fit here for Millennials in the form of something more family-friendly and community-oriented? Perhaps. If malls hope to survive and to defy the gleefully gloomy predictions of the new urbanists, they had better find that fit.

Neil Howe, economist and historian, is president of LifeCourse Associates and Saeculum Research.

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