Future of Malls: Rethinking outside the big box to save shopping centres
Pandemic lockdowns could have been the death knell for shopping centres. That said, they may also end up being the lifesaver these real estate behemoths need in order to become relevant again.
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The mall landscape has been repeatedly reshaped over the past few decades in expensive attempts to predict the future of malls. These massive redesigns have typically added swathes of dining and entertainment venues to the shopping centre ecosystem in attempts to lure crowds to linger for longer and, of course, to spend, spend, spend.
ON THE PRE-PANDEMIC PRECIPICE OF PHYSICAL RETAIL
As the 2020s dawned, the future of retail was becoming increasingly difficult to predict, except for the seemingly unbeatable and unstoppable Amazon juggernaut that just kept on growing its reach and revenue.
Amazon reverse engineered what is known as omnichannel retail by first conquering the online marketplace and only then opening physical stores. Meanwhile, all around it, long-established retailers were shutting stores and struggling to provide the competitive prices and efficient service that online shoppers had now grown accustomed to. Scaling up presented a monumental challenge for many of these high-touch, personalised-service retailers as the infrastructure was barely there (if at all).
Then came March 2020.
INSTANT DELIVERY: THE TIPPING POINT ON THE FUTURE OF RETAIL
As the lockdowns began, many industries suffered huge losses. Businesses were forced to drastically downsize or completely shut down. Overnight, online shopping and touch-free delivery became the necessary new normal. And solving the challenges of the last-mile delivery became the holy grail of online retail.
Commercial real estate reeled from the seismic shift in the market: suburban shopping centres were utterly deserted while online retailers and instant delivery services clamoured for mini warehouses in residential areas. Could shopping centres meet the needs of the pandemic-era entrepreneurs and still provide space for the surviving merchants that had managed to get omnichannel retail right?
LOCATION, LOCATION, LOCATION
For major online retailers, malls are typically located close to major motorway junctions and have easy load-in access, making them good candidates for regional bases. For instant delivery services, shopping centres offer a variety of spaces that are ideal for dark stores (stocked for and shopped by instant-delivery couriers only) and can be right-sized to the customer base for the immediate area.
And for omnichannel retailers, malls offer revisable spaces that can provide in-person services (cosmetics makeovers, tailoring and personal shoppers) with the option of a 3D catalogue of merchandise that can be scanned with a smartphone app and ordered onsite – all in a curated boutique environment. Further still, micro fulfilment technologies at shopping centres can be utilised by all three of these business types, or “buy online, pickup in store” (BOPIS) onsite order filling.
OBSTACLES, OBSTACLES, OBSTACLES
It’s not all plain sailing for shopping centres, however. Mall properties commonly have multiple owners, making negotiating for space and getting buy-in on the necessary renovations tricky.
Current tenants and remodels that are already underway (such as replacing segments of former retail space with apartments and blocks of flats) could take many sites off the table. Zoning requirements further complicate matters, with local governments unlikely to move at the speed needed for these rapidly growing new businesses.
WHAT’S IN STORE FOR THE FUTURE OF RETAIL?
How likely is it that the stars will align for these proposed mall-conversion ventures? Will the efforts to replace failed department stores with residential, sports or entertainment venues that were started before the pandemic prove to have been the right move for property owners who have been bleeding rental income for years now?
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