Current Investing Analysis
What’s up With the Shopping Malls?
I’ve been worried about the mall for a while now. Starting with the recession, housing bust, and mortgage meltdown in 2008-2009, the store vacancies in the local malls are growing. Even today, with a more prosperous economy, there are still vacancy pockets in the large and strip malls. And if shopping malls falter, so will investors.
With the preponderance of available shopping venues, is the supply of bricks and mortar outlets outstripping demand?
Shopping is everywhere. Within 5 miles of my Silicon Valley base I’ve got 3 Target’s, several Kohl’s, countless strip malls, and a major Westfield owned mall. Go out a few more miles and there’s even more commerce.
Is Online Shopping Hurting the Malls?
The trend today is an increase in online shopping. According to U.S. Economy exert, Kimberly Amadeo, of useconomy.about.com, in “Consumer Spending Trends and Current Statistics” consumer spending has been “basically flat since 2012”.
Think about it, with many consumers forgoing the bricks and mortar stores and increasing their online buying, what’s going to happen to the malls? Especially if the amount of shopping dollars is stagnant.
The Marriage of Shopping Malls and Start-Ups
Can the mall be saved? Maybe, there seems to be a new trend which may help the faltering malls.
Ruth Simon wrote a recent WSJ.com article, “Mall Operators Begin Cultivating Startups”. Simon went on to discuss the nation’s largest mall developer, Simon Property Group investing approximately $20 million in 18 start-ups. That article also mentions that Westfield Corporation, my neighborhood mall owner, is getting in on the start-up game, under its Westfield Labs moniker.
Do the malls have a plan to get in on the start-up boom in order to save their skin?
The Store as a Fulfillment Center?
The malls exploration into the start-up arena dovetails with my fear that the changing consumer habits and excess retail square footage necessitates change. Bring in Deliv Inc., a crowd-sourced delivery service, link them up with the local retailers and you have an Amazon competitor. It’s nice for the consumer to buy a dress at Macy’s online and Deliv Inc. brings you the frock in 24 hours, directly from your local shopping outlet.
Is this the wave of the future-malls and delivery service?
Come to the Mall to Donate Your Stuff
Simon ponied up $1.5 million to FashionProject.com, an online retailer who collects good condition clothes, then sells them and donates the proceeds, up to 55%, to the consumers’ favorite charity.
Here’s the catch, the donations are taken directly to the mall. This is a win-win partnership. The mall receives more traffic, you get the clothes out of your closet, and the charity benefits.
This is another scheme to keep the mall relevant.
The Investing Takeaway
Mall owners who invest in start-ups benefit by creating alternative uses for the multitude of shopping spots. The start-ups benefit through more capital to grow their businesses along with increased exposure.
The consumer benefits with more choice and better service.
This could be a saving strategy for the abundance of retail shopping spots.
Finally, when malls prosper, you might profit as well. For investors, real estate investment trusts (REIT) are a way to own real estate without all the hassle. Part of our family’s asset allocation and one of my favorite ways to invest in the real estate market is through a REIT.
REITs come in many varieties from mortage, to office, to diversified, and international. A small part of our family asset allocation is dedicated to both U.S. and global REIT index funds.
Could these new mall and start-up partnerships save the mall, and create a stronger future for REITs? No one can predict the future, but without change, the economic supply and demand forces will thwart the mall as we know it today.
