If e-commerce keeps growing, what happens to malls and stores?

As e-commerce continues to grow and activist investors pressure stores to divest their online divisions, what is the outlook for bricks and mortar retail? We recently spoke with Naveen Jaggi, the head of retail at JLL, one of the largest players in the commercial real estate world. Specifically, we discussed the future look of shopping centers and malls. I’ve summarized our thoughts in the following bullets. In the future, we can expect:

  • Fewer traditional anchor tenants. While malls traditionally have had large department stores as their anchor tenants, the shrinking of many of those brands like Macy’s means that new tenants will occupy those large properties in the future. Expect to see mall space welcome new businesses and change from shopping to other uses, whether office space (think businesses like WeWork), civic activities (think city and state government offices), residential buildings, or something else again.
  • Fewer movie theaters. The movie theater space was a major shopping center tenant for many years. However, with revenue precipitously down since the beginning of the pandemic, studios changed movie release schedules, particularly the release of movies through streaming at the same time as their theatrical releases, thereby changing the fortunes of theaters. There may be no going back from that, though some are optimistic it’s only temporary. For now, theaters also often block off a percentage of seats to allay the safety concerns of moviegoers – but that also reduces their volume. Americans are likely to watch more entertainment than ever, but we think less and less of that will happen in theaters.
  • Tension with e-commerce fulfillment. As e-commerce grows and the pressure rises to get products to shoppers faster than ever, fulfillment centers must be located closer to shoppers. Shopping centers are natural locations for those micro-fulfillment centers, but not all cities at this time are eager to embrace fulfillment centers as a fill-in for disappearing stores.
  • A resilient, more tech-forward restaurant sector. While consumers are spending more at restaurants than even before the pandemic, labor costs are creating some service problems. Restaurants may face a permanent hike in wages and those that are most automated with forward-thinking investments in tech will be those best equipped to maintain their margins.

We’ll be releasing more the coming year including our digitally influenced offline sales forecast for the US in the coming months. If you’re a Forrester client, you can also schedule an inquiry.

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