The Curse of Zombie Shopping Malls
The recession has left many desolate malls and office buildings in its wake, and this poses a potential economic crisis. If these malls and commercial properties fail, they could take down hundreds of small and medium-sized banks with them. This, in turn, may lead to reduced lending and even eviction of families from rental properties, MSNBC recently reported.
Shopping malls were particularly hard hit by the economic crisis that began in 2008, as consumers reined in their legendary spending and national chains such as Circuit City, Sharper Image, and Lillian Vernon went bust, leaving gaping vacancies at many shopping centers. Suddenly, the mall -- the temple of American consumerism -- was in trouble. Today, consumer spending is still down and commercial property values have fallen 40 percent from their peak. The landscape is littered with struggling or dead malls.
There are no government programs for underwater commercial property owners who owe more than the property is worth. Has the time come for the shopping mall to be reinvented?
For many people, the answer is yes. In fact, you might be surprised by some of the folks who have publicly rejected the mall concept.
Victor Gruen, the Los Angeles-based architect credited with building the first shopping malls, said in a 1978 speech that he swooned in horror at "the ugliness...of the land-wasting seas of parking" around most shopping malls, and the soul-killing sprawl beyond.
The recession may only hasten cultural changes already underway. Today, people have embraced online shopping and big-box discounters such as Wal-Mart. Wal-Mart models itself as a "mall" which provides an array of deeply discounted items under one roof. A full thirty percent of Americans are said to shop at Wal-Mart every week.
After decades of furious growth, no new malls have been built in the last two years. And in 2008, more than 150,000 individual mall stores closed, according to a report by CBS News Early Show. Once the anchor tenants leave or default (hello, Circuit City), smaller stores frequently suffer from significantly decreased foot traffic and eventual closure. (That's one reason why General Growth Partners, one of the nation's largest mall operators, filed for bankruptcy protection last year).
If the inventor of malls isn't too happy with the result, and shoppers are pinching pennies or buying online, what will become of the once-mighty American mall that has become a central feature of the landscape?
Some malls are simply torn down. Others are rebuilt. Some are revamped to resemble a "town square" with play areas, dining, and even apartments or condos in a compact, walkable format -- a sort of Disneyfied downtown. Others are rebuilt as strip malls with side-by-side individual stores sharing a common parking lot. Some more creative thinkers envision a future where dead malls will be remade into "water parks, wave machines, or other fascinations."
Meanwhile, the zombies lurch forward. For a glimpse of our mall-challenged future, take a look at the difficulties experienced by Chicago's "Block 37" project, which was hardly filled to capacity when it opened. Here's a video showing its multiple empty floors.
There's even a web site that tracks the decline of this cultural and economic institution: DeadMalls.com. (Click on "Features" to find one near you).
Good riddance, you might say. But a dead mall creates more than just job losses and built-environment waste. These zombies can also damage your hometown in other, less obvious ways.
Smaller banks are more vulnerable to dead mall losses since commercial real estate makes up a larger portion of their portfolios. A shopping plaza project turned disaster can wreck a small bank, bringing down every other depositor and small business with it, or curtail lending in the area.
Small banks, however, might be bolstered by the grassroots movement to do business with small institutions, rather than large mega-banks -- you know, the ones that brought on all of the trouble we're now in. (See Huffington Post's call to action as well as the website Move Your Money). More deposits could cushion the loss of a dead mall for a local bank.
Still, with the mall model heavily reliant on cars and fuel, shopping malls may soon exist as dinosaur parks of another age.
"On the Brink: Sbarro's Braces for the Great Shopping Mall Recession" [Daily Finance]
"Borders Will Axe 200 Waldenbooks Stores, 1,500 Jobs" [Daily Finance]