August 9, 2022

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‘The mall is not dead’ amid rise in online shopping, retail expert says

With Westfield Malls’ European owner announcing it’s looking to unload its portfolio of American malls by next year, the outlook seems grim for U.S. shopping malls amid the e-commerce boom. However, consumer and retail expert Natalie Kotlyar, managing partner at BDO USA, believes malls still have life left in them.

“So this is certainly nothing new, this whole conversation about the [decline of malls],” Kotlyar told Yahoo Finance Live. “And are we moving away from the mall? So I am here to tell you that the mall is not dead. Consumers are still going into the malls. And they will continue to go into the stores.”

Kotlyar said mall performance going forward varies based on geographic location, but a steady return to brick-and-mortar shopping destinations has been observed as the global economy shifts away from pandemic conditions.

“Obviously, as the pandemic somewhat subsided, consumers were more comfortable going to the stores,” she added. “And in fact, we’ve seen a significant uptick in foot traffic over the last nine to 12 months in the malls as consumers became more comfortable with going out into the physical locations. So I do think that there is a need for malls.”

People carrying shopping bags walk inside the King of Prussia shopping mall, as shoppers show up early for the Black Friday sales, in King of Prussia, Pennsylvania, U.S. November 26, 2021.  REUTERS/Rachel Wisniewski

People carrying shopping bags walk inside the King of Prussia shopping mall (Reuters)

Kotlyar joined Yahoo Finance Live to discuss misconceptions about the state of mall retail, trends in online and in-person shopping, and the commercial real estate industry with regard to mall and warehouse spaces. Westfield’s plans to sell its American mall locations will leave 24 shopping centers and more than 37 million square feet of real estate up for grabs.

As for what will become of the space if it is acquired, Kotlyar says the former malls may be converted to be used for a wide variety of purposes.

“So we’ve seen this already happening — perhaps not to this extent — but we have seen some malls become hospitals, housing, nursing homes, warehouses,” she said. “Obviously, there is a need as e-commerce increases for additional warehouses. Because we all want our stuff right away. So this is nothing new.”

The e-commerce boom

Indeed, Amazon (AMZN) is already hard at work giving new leases on life to mall spaces, having converted at least 25 malls to distribution centers since 2016. The e-commerce surge continues to place pressure on in-person shopping, with more than half of global retail growth projected to come from online sales between 2020 and 2025.

The market for global e-commerce and other non-store retailers is also expected to reach $5.1 trillion by 2026. In spite of these forecasts that may paint a bleak picture for the future of malls and brick-and-mortar shopping, Kotlyar thinks the uncertainty surrounding the current macroeconomic environment makes it too early to say that malls are done for good.

“Retailers today have had a significant increase in revenue over the last year,” she said. “2021 was a great year for retail, for many retailers, as we know. And obviously, that came on the heels of whether it was the stimulus package, whether it was pent-up demand, whether it was back to school, which we haven’t had in-person school for quite a while.”

Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV

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