‘The mall is not dead’ despite increase in online shopping
Natalie Kotlyar, BDO National Managing Partner, Industry Groups & Retail & Consumer Products National Industry Leader, sits down with Yahoo Finance Live to talk about misconceptions on the state of mall retail, trends in online and in-person shopping, and the commercial real estate industry in relation to mall and warehouse spaces.
– [INAUDIBLE] and some major mall news coming in this week. The owner of Westfield Malls, who has 24 shopping centers across the country and more than 37 million square feet says they plan to sell all of their malls by the end of next year and get out of the US entirely. Is that the final nail in the coffin of the American mall? Let’s talk about it with our guest Natalie Kotlyar, BDO national managing partner. Natalie, thanks for being here. Is that officially the death of the mall?
NATALIE KOTLYAR: So thank you. Thanks for having me. We’ve seen the discussion, is retail dead, is the mall dead, for years now. So this is certainly nothing new, this whole conversation about the mall. And are we moving away from the mall? So I am here to tell you that the mall is not dead. Retailers are– or consumers are still going into the malls. And they will continue to go into the stores. It’ll depend obviously on the location geographically. But I do believe that we’ve seen a significant increase in movement into the brick and mortar over the last maybe six months, nine to six months.
Obviously, as the pandemic somewhat subsided, consumers were more comfortable going to the stores. And in fact, we’ve seen a significant uptick in foot traffic over the last, again, nine to 12 months in the malls as consumers became more comfortable with going out into the physical locations. So I do think that there is a need for malls. Are there going to be fewer malls? Perhaps. But there is certainly a need for malls. And the mall is not dead.
RACHELLE AKUFFO: It’s interesting. Because as you mentioned then, with this increase in foot traffic, with the restrictions coming down, and people returning to the mall, I wonder about the timing. Because the company says it wants to shed most of its US properties by 2023. That’s a pretty aggressive timeline. Why do you think it’s such a fast turnaround considering the people are starting to come back to the malls?
NATALIE KOTLYAR: So I can’t speak for them specifically. But based on what we have seen and based on the research that we have done, there’s going to be as the economy unfolds, and as we see the effect of inflation, the effect of the higher wages for the employees, continuation of supply chain, there’s going to be a lot of stress that’s being put on the retailers today. And retailers are primarily the brick and mortar are in malls. So there’s that.
And as the economy unfolds, as inflation and the effects of inflation take place, there’s going to be several factors. So there’s going to be a buildup of these issues on the retailers. And it’ll depend how they react to it. Retailers today that have had a significant increase in revenue over the last year, 2021 was a great year for retail, for many retailers, as we know. And obviously, that came on the heels of whether it was the stimulus package, whether it was pent up demand, whether it was back to school, which we haven’t had in school, in-person school, for quite a while.
So we did see this big increase in foot traffic, consumers going out into the malls. In fact, we even saw a decrease in bankruptcies as Retail in the Red report states. So the question is going to be, well, what’s going– what will happen going forward?
– Exactly. And let’s talk about that. Because I mentioned the numbers, 24 shopping centers, more than 37 million square feet. So what becomes of those? Is that a massive commercial real estate graveyard across the country? Or is some company going to come in and fill that void and actually build new malls?
NATALIE KOTLYAR: So we’ve seen this already happening, perhaps not to this extent. But we have seen some malls became whether hospitals, housing, nursing homes, warehouses. Obviously, there is a need as e-commerce increases, there is a need for additional warehouses. Because we all want our stuff right away. So this is nothing new. Perhaps this is a little bit more of a drastic, quicker change to shut down the stores. But this is nothing new from a mall perspective.
RACHELLE AKUFFO: And just very quickly have about 30 seconds. What sort of re-imagining of these spaces could we see in the future then to really reflect how we’re changing how our lifestyles are changing so that people can still use these spaces and some of these commercial realtors can still get their rents?
NATALIE KOTLYAR: So I do think that they’re going to, as I mentioned before, they’re going to turn into whether warehousing, which doesn’t really affect the consumer unless it’s going to be closer to their home, they’ll get their products faster, whether they become gyms, whether they become urgent care centers in all of these various areas. So there’s definitely a thoughtful conversion of these malls.
RACHELLE AKUFFO: All right. Well, so the mall not dead yet according to Natalie Kotlyar, BDO’s national managing partner an industry groups and retail and consumer products national industry leader. Thank you so much.