The new American shopping mall is less Macy's, more church, bowling, Barnes & Noble

Enclosed malls, long in decline, are experiencing a strategic revitalization driven by the repurposing of vacant anchor spaces with non-traditional tenants and experiential concepts. This trend is exemplified by the Dayton Mall, where a former Sears now houses a church that significantly boosts foot traffic and cross-shopping. Major landlords like CBL Properties and Brookfield Properties report increased revenue from subdivided anchors and diversified offerings, with Placer.ai data confirming a tangible rise in mall visits. This shift towards community and entertainment hubs, including the re-entry of traditional retailers like Barnes & Noble, indicates a potential rebirth for the asset class by attracting new demographics and driving 'cross-shopping' behavior.

Analysis

The enclosed mall real estate sector is undergoing a structural transformation, shifting from a dependency on traditional anchor department stores to a diversified, mixed-use model that is beginning to yield measurable positive results. Evidence from major landlords like CBL Properties indicates that subdividing and repurposing vacant anchor spaces can increase revenue five to six times compared to former tenants who generated $7-8 million annually. This strategy involves incorporating non-traditional tenants such as community-focused organizations, exemplified by the Crossroads Church at Dayton Mall, and experiential concepts like restaurants (The Cheesecake Factory), entertainment venues (Dave & Buster's), and even yoga studios. Independent data from Placer.ai validates this trend, showing a tangible increase in mall foot traffic, with holiday 2024 visits notably strong due to non-retail activities. The strategic re-entry of retailers like Barnes & Noble, which is actively seeking former Forever 21 locations and can account for a significant share of mall visits (7.9% in one case, outperforming Macy's), further underscores the shift. While headwinds persist for legacy tenants, as evidenced by Claire's bankruptcy, the successful reprogramming of spaces is repositioning malls as community hubs, attracting demographics like Gen Z who value in-person experiences.

Key Decisions for Investors

• Investors should re-evaluate mall REITs, favoring those like CBL Properties and Brookfield Properties that demonstrate a clear strategy of repurposing anchor stores with a diverse mix of experiential, dining, and non-traditional tenants.
• Consider the relative strength of new-era mall tenants like Dave & Buster's (PLAY) and The Cheesecake Factory (CAKE) which are integral to the mall revitalization strategy and benefit directly from increased foot traffic.
• Exercise caution with exposure to traditional department stores like Macy's (M), as their ongoing store closures are a primary catalyst for the landlords' restructuring efforts, signaling persistent structural weakness for that retail format.
• Monitor key performance indicators such as leasing spreads on repurposed spaces and third-party foot traffic data to validate the durability of this reported turnaround in the enclosed mall sector.