Prior to COVID-19, mall and retail closings were rampant across all size communities. Cracks were showing in places such as Chicago’s Magnificent Mile, Omaha, Nebraska, and smaller communities around the country. Credit Suisse, one of the premier retail sector analyzers in the country, reported recently that one out of every four malls will shutter their doors in the next five years. COVID-19 has sped up this timetable 50%. This is on top of the previous closings across the country that account for a square footage footprint greater than the city of Boston.
From a story in The Atlantic: “The United States devotes four times more of its real estate square footage to retail, per capita, than Japan and France; six times more than England; nine times more than Italy and eleven times more than Germany.”
One need not be a rocket scientist to determine that we are in for a major retail correction sooner, if not later.
When small and midsized communities attempt to rebuild one’s community, specifically their downtowns, the critical decisions your community and the locally owned businesses make today will be felt for years to come. If you believe your community is the outlier and can buck the coming retail correction, you will be vastly disappointed. On the other hand, if your community provides incentives and the retail base starts to build their business around unique customer experiences, you can buck the national trends. Unique experiences are the one thing online shopping won’t provide. In fact, many major online retailers including the largest, Amazon, are opening up bookstores and buying food chains. They are doing this because they understand that customer experiences are vital to their overall long-term success. Apple stores, while selling technology, are selling experiences as well.
Forward thinking communities are looking beyond the retail space and adding more work opportunities in their downtown footprints. While retail can create a unique downtown ambiance, note the highest rents paid in places like San Francisco, Chicago or Boston are rarely due to retail, rather, it is due to being in a thriving business district. Yes, retail and restaurants are part of the equation, but by and large, it is driven by the business district rents and occupancy. As your community starts to attract the proper business base, it should then start taking advantage of the younger generations desire to live in a more developed environment. This involves the adding of loft-living, experienced-based retail and unique dining opportunities in the area.
Hardest hit by the current and pending retail apocalypse are malls. Malls throughout the country are dead men walking in many cases. With thousands of malls and strip malls on the brink, what should small and midsized communities do to overcome this massive economic shift? We are seeing malls converted to satellite campuses for colleges, food and ethnic markets, innovation incubators, entertainment venues, student housing, office projects, art studios, mega churches, paintball parks, post offices and so much more.
During downturns, communities must be proactive. Regardless of whether your community or downtown has a mall to deal with or downtown to revitalize, now is the time for communities to take bold, and might I even say, unprecedented steps. Now is the time to take a chance on your residents and incentivize them to be innovative and daring. Yes, not all the gambits will yield great results. Out of 10, you might get some great successes, a few middle-of-the-road successes and a few failures. All are great classroom learning opportunities for future endeavors. The worst thing a community can do during the next few years is to play it safe or be too timid hoping for better days ahead. That would be a fool’s errand.
John A. Newby, author of the "Building Main Street, Not Wall Street" column, magazine and Facebook group dedicated to helping communities and media companies work together allowing both to not just survive, but thrive in a world where truly local is lost to Amazon, Wall Street and others. His email at: [email protected]