The painful truth about the retail bloodletting is that it’s been a long time coming. Since about 2003, when they went on a construction tear, American builders have lived by the Field of Dreams rule: build it and customers will come. Now, there are way too many stores, and way too much space devoted to them: Credit Suisse says a quarter of American malls up to 275 of them will shut over the next five years CoStar, the real estate research firm, tells Axios that the excess is more like 150.
Quick take: “What we are seeing going on is Darwinism at play,” says CoStar’s Ryan McCullough. “We believe that all these closures will have a healthy impact on the industry, but there will be a disruptive process till we get there.”
By the numbers: There are about 1,190 malls in the U.S. American retail as a whole is overbuilt Americans have far more indoor shopping space than anyone else on the planet. As of a year ago, that was 23.5 square feet per person. Two next two on the list Canada and Australia have 16.4 and 11.1, respectively.
The bottom line: Analysts view this as an issue of productivity sales divided by space, more or less. By that measure, American retail productivity as a whole is 7.5percent below the long-term average, McCullough says for retail, the shortfall is 13percent. To get back to the average, 150 million square feet of mall space adding up to 150 malls “need to go away,” he says. Overall, retail needs to close down 1.5 billion share feet of space.
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McCullough doesn’t think the result will be so many malls closing, but a lot of individual stores shutting their doors across the whole population of malls.
Date: December 21, 2017