Malls need a new business model: report

Report suggests mall landlords should seek tenants in growing industries like beauty, home furnishings, and restaurants

Saks Fifth Avenue stretches to all three of Brickell City Centre's retail floors
Saks Fifth Avenue stretches to all three of Brickell City Centre's retail floors

The fall of big box retail has led researchers at CBRE to conclude that the 70-year-old mall business model needs an update.

A report released Tuesday by the real estate services firm revealed that malls need to look for tenants that are less susceptible to e-commerce competition, The Wall Street Journal reported.

CBRE findings suggested that malls should shift sights towards tenants in growing industries including beauty, home furnishings, and restaurants.

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Figures from the report revealed that big box department stores like Macy’s and Dillard’s still occupy about 50 percent of mall retail space. Additionally, 29 percent of leasable mall space is occupied by accessories and clothing retailers that are also susceptible to e-commerce competition, according to the Journal.

“Many department store chains gradually have become more accepting of change, but it isn’t a given,” the report read. “Those who reject change may do so at their own peril: There is a growing trend of mall owners buying out department store leases and redeveloping the space into restaurants and specialty stores.”

With the mass exodus of department stores from malls, warehouse landlords have been turning to the vacancies as potential sites for customer fulfillment centers and delivery sites. Last month, activist investors also showed interest in failing department stores like Dillard’s, hoping to unlock potential property values. [WSJ] Grace Guarnieri