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As online shopping continues rapid growth, some malls can't avoid 'death spiral'

Posted May 6

With online retailers like Amazon now offering delivery within the hour, malls in America are at a crossroads.

A new report by analyst firm Green Street Advisors estimates that up to 15 percent of malls nationwide will close in the next decade. Those that survive will have to continue to adapt rapidly to a changing retail landscape.

Not that long ago, malls were booming. Before the housing crash and economic recession that followed in 2008, department stores – often the heart of most malls – were expanding at a breakneck pace.

During the recession, however, profits began to tumble. Many malls, including Raleigh's Triangle Town Center and Cary Towne Center, are now seeing a spike in vacancies.

Popular anchor stores such as Macy's, Sears and JC Penney are consolidating hundreds of locations as they try to restore profits to pre-recession levels. Green Street Advisors says another 800 closings would be needed to get profits back to 2008 levels.

The prevalence of online shopping has made things tougher – online shopping sales are now higher than $50 billion a year.

While some malls continue to suffer, others, like Raleigh's Crabtree Valley Mall, are thriving. Chip Lanier, a chief recruiter for the mall and director of real estate for mall owner Plaza Associates, says it's about finding the right retailers.

"I think the key to Crabtree's success has always been to go after the unique talent," he said.

After finding the right tenants, Lanier said it's also key to put retailers in position to succeed.

"It used to be big stores, and now you're seeing a lot of smaller footprints," Lanier said. "Not only does the look of the store have to feel luxurious and unique, but you also have to provide amazing customer service."

Green Street's report predicts malls anchored by Sears, JC Penny and Macy's are at the greatest risk for what it calls the "death spiral." Green Street says those malls could become irrelevant within 10 years.

Malls showcasing top-tier restaurants, movie theaters and even grocery stores are predicted to thrive. Crabtree Valley Mall and Durham's Streets at Southpoint Mall are both "Class A" malls, according to Green Street, meaning they are well-positioned to succeed rather than deteriorate.

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