The requested news item does not exist. Please return to News
The U.S. has about 7 billion square feet of
Yes, you read that right. As in seven billion, six hundred and twenty five million, one hundred and sixty thousand square feet of retail space for every man, woman and child in the country.
Based on a current U.S. population of just over 323 million people, that comes out to almost 24 square feet of retail space for each and every person, about the size of a master bedroom in a decent size home or apartment, depending on where you live. To say that the United States is over-retailed is to put things mildly.
Last year Sports Authority shuttered all 450 of its stores. With almost every location exceeding 40,000 square feet, that's 18 million square feet of vacant anchor-tenant retail space unexpectedly going back to the landlords and triggering more potential "dead malls" in the process.
China is building over 100 shopping malls each year, creating a glut of available retail space within many trade areas.
Will the "dead mall" phenomenon hit China next?
Although dead malls seem like a recent phenomenon, they've actually been around for quite some time in the U.S. Back in the 1960s when the first generation of regional shopping centers was built, soon thereafter the failures began to emerge.
In Tampa, Florida, near the once-thriving and now deceased Floriland Mall, one of Tampa's first enclosed shopping malls was built in the '60s. When a new brighter, shinier and flashier competitor was opened just a few miles away, Floriland began to struggle almost immediately.
By the 1980s the mall had deteriorated from a Class A property to even worse than a Class C, with tenant quality scraping the bottom of the barrel. The mall became essentially one giant flea market and a magnet for crime and petty theft. Although the owners did the best they could to revitalize the property with a facelift and by opening a children's museum, Floriland was converted to Class C office space in the 1990s.
Another shopping mall in Tampa met a similar fate, lasting only 22 years before it was converted and re-positioned as a business park by the late 1990s.
The majority of the classic, regional indoor shopping malls were built over a 10-year period between the mid-1970s and the mid-1980s. Over the years, both the demographics and consumer behavior in the trade areas changed, causing many malls to close when they were unable to respond in time to the economic shift taking place.
There are three common elements that almost all failed shopping centers have in common:
Despite all of this doom and gloom, not all older shopping malls are going the way of Floriland.
In Tampa there's a vintage, 1960s-era shopping mall that has continued to thrive for the entire 50-plus years that it has been in existence. The property is located in a mature, under-served area, far from any new competitor, and is ringed by an upper-income demographic.
The reality is that older shopping malls built over a generation ago can still perform extremely well, attracting the teenage children of the parents who once frequented the same mall when it was brand new. True, these kids might be talking and texting on their cell phones, but they're still in the shopping mall buying things.
While some groups migrate from the urban centers to the suburbs, people also move into the under-retailed areas, creating an opportunity for new retail development. In Sarasota, Florida, the first enclosed mall to be built in decades was constructed in a wealthy but under-served retirement area.
There's no doubt there is some truth to the devastation that the e-commerce businesses are wreaking on the brick-and-mortar retailers. Shoppers intentionally go 'show rooming' in a traditional store to see and feel an item, then buy the exact same thing online for a lesser price and with free shipping.
But the effects of e-commerce and show rooming vary widely based on what is being sold. Food, beverage, entertainment products, and service businesses have so far been immune to the e-commerce affect and will likely continue to thrive. The three variables are: "time", "touch", and "money", as described by James Cook, Head of Retail Research, Americas for JLL.
Now, what about those 100+ shopping centers opening up in China each year?
Over the last 15 years, much of the shopping center construction in China was a combined response to rapid economic growth and centralized pre-planning. Retail property was built as quickly as possible, sometimes in advance of the population growth, and stores immediately opened for business.
Many of the shopping malls built in China prior to 2010 were what one might expect from a country rapidly transitioning from one of centralized control to one driven by consumer consumption. Projects were utilitarian and practical in both appearance and function, constructed with a one-size-fits-all template: Put up four walls, hang some display shelving, install a cash register, and you're in business!
The psychological tools used in traditional retail marketing, design and management weren't really applied because the image and environment of the shopping center was not a priority. Shopping center construction in China was akin to that of the U.S. in the 1960s, with traditional boxy department stores but with the word 'mall' added at the end of the property name to make it sound like something new and different.
This approach worked for consumers from the last generation, where going to the mall involved a transaction rather than an experience. And this approach also worked in China, at least for a short while.
Over the last few years the Chinese consumer has quickly become bored as their expectations for a shopping experience have increased exponentially thanks to the Internet, international exposure, and rapidly increasing wealth and sophistication.
While the jury is still out as to whether China is at risk of a "retail apocalypse", there are three items to consider:
In Beijing, for example, it appears that online shopping has reached a stage of maturity. Delivery costs are rising rapidly, and absent some major infrastructure development, delivery times may soon rise as well, removing one of the major competitive advantages of e-commerce.
To answer this question, we looked at retail space per person in China's key cities compared to major Asian benchmarks. In all of these cases, we refer to JLL's own stock data which captures shopping centers and department stores. There are two distinct groups: cities like Beijing and Nanjing which are relatively typical by Asian standards, and then places like Chengdu and Shenyang which are at the far upper end of the range for Asia. Hong Kong and Singapore can support the levels of retail provision that they do because they are major regional tourist hubs. Cities like Changsha, clearly, are not international tourist hubs. These are cities that have clearly built ahead of demand and will take time for demand to catch up. However, retail is not a city-level discussion, and local factors matter. Refer to our other piece on
5 Ways to Analyze Retail Oversupply in China
When it comes to shopping mall retailing there's one thing that we can be sure of . . . .
People being people, the desire and hunger for a life-style, social experience in the community, no matter where they are in the world, is not going away any time soon.
– ends –
>>>Read more about JLL Services>>>Read more about JLL News>>>Read more about JLL Research
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with 36,000 employees operating in 94 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the fifth consecutive year by Real Capital Analytics. www.jll.com/asiapacific
In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country. www.joneslanglasalle.com.cn
+86 (10) 5922 1371
+86 (10) 5922 1387