Through a special arrangement, presented here for discussion is a summary of a current article from Consensus Advisors, a boutique investment and advisory firm specializing in the retail industry.
Among the mega-trends to emerge from the financial crisis is the decline of the suburban shopping mall. Yahoo Finance's Breakout reported recently that over 400 of the nation's 1,100 enclosed regional malls have either been "repurposed" or closed outright and no new malls have been completed since 2009.
Suburban shopping malls, it seems, have become victims of the convergence of trends: consumer austerity, the internet's growth, a push towards local and authentic shopping, and a population migration to urban centers.
But, to misquote Mark Twain, the reports of the death of the suburban mall may have been greatly exaggerated. According to data from Plunkett Research and the International Council of Shopping Centers, shopping centers made up nearly half of all retail sales (including food) in 2013 and have generated solid growth this spring despite the chilly weather. The National Council of Real Estate Investment Fiduciaries shows vacancy rates at both power centers and super-regional sitting well below national averages.
To be fair, some regional malls are generating all-time high sales volumes, while others (by some estimates, one-third of all such malls) are expected to have to close in the next five years.
On a particularly encouraging note, however, new Census Bureau data is showing that the growth rate of people moving to the urban core in the U.S. is declining and the growth rate of suburbs and exurbs (i.e., areas beyond suburbs but within the same metro area designation) is once again accelerating. According to a recent Wall Street Journal article profiling the trend, 31 of 51 metropolitan markets had suburbs and exurbs growing faster than their core cities.
A population shift back to bigger homes with larger closets, more rooms and yards is good news for retailers. Nearly all categories at retail benefit from people having more space and living father apart from one another.
Can we count on increased suburbanization as a trend? At the risk of obviousness and oversimplification, Americans migrate from cities to suburbs/exurbs when they need and can afford more space. Often, this happens when building a family. While family development was deferred by the Millennial Generation during the financial crisis, as job prospects for its student-loan-laden members improve, it may be logical to assume the U.S. will experience a growth in family creation and subsequent suburb shift. With this will come new home development and all of the accompanying nesting that drives retail purchases.
If the Census Bureau data is indeed a trend, it could be a strong reason to be bullish about the long-term prospects of the industry. Now, if we could only get some favorable weather patterns.