Malls Adapt: Will Department Stores Disappear From the Equation?By Daniel González | Fri, 06/26/2020 - 08:00
Before the pandemic, department stores, as well as movie theaters, had become the Holy Grail of shopping mall construction. Without at least one of them, a project automatically became unviable. “When I started building malls in the 1980s, department stores were the lifeblood of the project. In fact, if you did not have a department store signed on the deal, well, you did not have a deal,” wrote on Forbes Greg Maloney, President and CEO of JLL Americas Retail business. Department stores provided prestige and the human traffic needed to feed the rest of the mall’s shops. Today, as Maloney explains, that vision is changing. The pandemic and the huge push for e-commerce have brought department stores and other mall vendors to the same level. In other words, the giants of the 20th century have lost their power as public attractors in this type of space.
The compulsory confinement imposed by many countries led to the temporary closure of most shopping centers in the world, which has provided the sector with reliable data on what the future of a key structure in the urban development of any city could look like. The elimination of department stores as an indispensable anchor to attract the public to a shopping center is one of the variables being considered for the future post-COVID-19. “To get department stores to sign onto the project you had to offer ‘sweetheart deals.’ In most cases, we would sell them the land or lease it to them for what essentially amounted to nothing,” Maloney continues. Shopping mall owners could now take advantage of the current situation by removing department stores from the equation, which could increase rental income in those spaces.
An example that could lead the way for the conversion of those old shopping centers can be seen in Mexico in the units that have been built during the 21st century. In some of them, such as Arcos Bosques, Park Plaza or Artz Pedregal, the anchors to attract public are not department stores but VIP cinemas and luxury restaurants such as Puerto Madero, Nobu, Negroni, Prosecco and Il Becco, which have found market niches for their businesses in these types of spaces.
According to the International Council of Shopping Centers, Mexico has 33 percent of all shopping centers in Latin America, making it the country with the most shopping centers in the region. In 2016, according to data from the CBRE consulting firm, Mexico City ranked third as the world’s city with the most shopping center openings, behind Shanghai and Beijing. In total, there are 786 shopping centers in Mexico.