Despite what you might believe from some of the headlines, the U.S. enclosed shopping mall isn’t dead, with many of these retail spots thriving. But not every mall is sharing in the sector’s post-COVID recovery.
That’s one of the key points in a new report from Coresight Research, The American Mall Renaissance: A Bifurcated Sector with Top-Tier Assets Leading the Way. According to the study, the nation’s enclosed mall sector has become divided between high-performing, top-tier properties and struggling lower-tier assets.
“The metrics we look at are heading in opposite directions with these two sets of malls,” said John Mercer, head of global research and managing director of data-driven research with New York City-based Coresight Research. “Whether you look at visits, net operating income, absolute rents or occupancy, the top-tier malls are performing well while the lower-tier malls continue to decline.”
The Coresight report found that by 2025, foot traffic at top-tier U.S. malls had nearly returned to pre-pandemic levels, sitting just 0.1% below 2019 traffic counts.
But the news wasn’t as good for lower-tier malls. Coresight found that foot traffic at these lower-quality malls remained 6.8% below pre-pandemic levels.
Then there are occupancy rates. In its report, Coresight said that top-tier U.S. malls average 95.5% occupancy compared to 89% for lower-tier centers.
The top-tier difference
So, what separates a top-tier mall from the rest?
Mercer said top-tier malls typically feature luxury and high-end retailers while serving affluent trade areas with higher household incomes.
“They are the malls that are thriving and attracting high-end retailers,” Mercer said. “The demographics surrounding the mall matter significantly.”
Those advantages create a cycle of success for higher-quality malls. When a tenant leaves a top-tier mall, its owners can often replace that retailer quickly. Lower-tier malls, though, face the opposite challenge: When an important tenant leaves a lower-tier mall, it’s more difficult for its owners to find a replacement.
“If you lose an anchor tenant in a lower-tier mall, you tend to see lower foot traffic in that space,” Mercer said. “Then it becomes harder to fill that anchor space. New tenants don’t join, and it can become a death spiral.”
New concepts
Luxury retailers continue to gravitate toward top-performing malls, but Mercer said some of the most interesting changes in the enclosed mall sector involve what is replacing vacant department store space.
As traditional anchors close stores, mall owners are increasingly turning to entertainment, fitness and healthcare concepts to fill large vacancies. Examples include immersive attractions such as House of Netflix, gyms, medical providers and competitive socializing venues, think experiential retailers such as indoor mini-golf company Puttshack and ping-pong-based entertainment venue SPIN.
“It’s not just about going to the mall for shopping anymore,” Mercer said. “These uses increase dwell time and bring consumers to the mall for non-shopping missions.”
The trend benefits owners in another way. Department stores often occupied space under favorable lease arrangements that generated relatively modest rental income for landlords. Replacement tenants frequently pay higher market-driven rents.
Other experiential concepts are helping malls reinvent themselves, too. Mercer pointed to attractions such as Dick’s House of Sport locations, which combine retail with interactive experiences.
“The mall becomes a more rounded experience,” Mercer said. “It’s a place to socialize, be entertained and engage with brands.”
Those changes make sense because consumers’ expectations of what the mall experience should be have also evolved.
“We live in an age of instant gratification,” Mercer said. “Consumers want engagement and experiences. Shopping is no longer purely functional.”
Mid-tier malls can thrive, too
While much of the Coresight report focused on the divide between top-tier and struggling malls, Mercer said that many mid-tier U.S. mall properties are increasing their foot traffic today, often by appealing to younger shoppers.
Just look at Gen Z consumers. They continue to embrace mall shopping. Retailers such as Abercrombie and Hollister remain popular among younger consumers, helping support many middle-market malls.
“There are a lot of healthy malls in the mid-tier category,” Mercer said. “A lot of the experiential retail opportunities can work there, too.”
Gen Z shoppers are often looking for discovery and novelty, Mercer said. They enjoy finding new brands and products and frequently return to stores that regularly refresh the merchandise that they offer.
That consumer behavior creates opportunities for malls that can provide changing experiences and a diverse tenant mix.
The lower-tier struggle
For lower-tier malls, however, the path forward is far less certain.
“Their options are limited,” Mercer said. “You lose traffic, you lose tenants. You lose tenants, you lose traffic. It becomes very difficult to turn around.”
Some struggling malls have found new life through redevelopment. In some cases, former retail properties have been converted into distribution facilities or mixed-use projects. Others have added apartments, hotels or other uses to their sites.
Residential development around malls has become increasingly common, Mercer said, particularly on excess parking lots surrounding existing centers.
“It’s something we’ve been tracking for several years,” he said. “It’s a good use of space and a trend that continues.”
Ultimately, Mercer said the future of retail centers depends on meeting consumer expectations that have been shaped by digital commerce.
Online shopping has become faster, easier and more convenient through quick-commerce delivery services, artificial intelligence tools and streamlined payment options. Physical retailers must respond by reducing friction within stores and creating better experiences.
“Retail is changing,” Mercer said. “Consumers have higher expectations today because of digital channels. Retailers need to reduce friction, improve the shopping experience and create reasons for people to visit.”
