Online shopping

“The mall is not dead” despite the 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 about the state of mall retail, shopping trends in online and in person and the commercial real estate industry with respect to shopping malls and warehouses.

Video transcript

[INAUDIBLE] and some major mall news coming this week. The owner of Westfield Malls, which has 24 malls across the country and more than 37 million square feet, said it plans to sell all of its malls by the end of next year and exit completely United States. Is this the final nail in the coffin of the American mall? Let’s talk about it with our guest Natalie Kotlyar, Country Managing Partner of BDO. Natalie, thank you for being here. Is this officially the death of the mall?

NATALIE KOTLYAR: So thanks. Thank you for. We’ve seen the discussion, is retail dead, is the mall dead, for years now. So it’s certainly not new, all this talk about the mall. And are we far from the mall? So I’m here to tell you that the mall is not dead. Retailers are – or consumers continue to go to malls. And they will continue to go to stores. This will obviously depend on the geographic location. But I believe we’ve seen a significant increase in movement towards brick and mortar over the last six months maybe, nine to six months.

Obviously, as the pandemic subsided somewhat, consumers were more comfortable going to stores. And in fact, we’ve seen a significant increase in foot traffic over the past nine to twelve months in malls as consumers become more comfortable going to physical locations. So I think there is a need for shopping malls. Will there be fewer shopping malls? Perhaps. But there is definitely a need for malls. And the mall is not dead.

RACHELLE AKUFFO: It’s interesting. Because, as you mentioned at the time, with this increase in foot traffic, with restrictions dropping and people returning to the mall, I wonder about the timing. Because the company says it wants to get rid of most of its US properties by 2023. That’s a pretty aggressive timeline. Why do you think it’s such a quick turnaround given that people are starting to come back to malls?

NATALIE KOTLYAR: So I can’t speak specifically for them. But based on what we’ve seen and based on the research we’ve done, there will be as the economy grows, and as we see the effect of inflation, the effect of higher salaries for employees, the continuation of the supply chain, there is going to be a lot of stress on retailers today. And retailers are mainly brick and mortar are in malls. So there is this.

And as the economy develops, inflation and the effects of inflation occur, there will be several factors. So there’s going to be an accumulation of these issues among retailers. And it will depend on their reaction. For today’s retailers who have seen a significant increase in revenue over the past year, 2021 has been a great year for retail, for many retailers, as we know. And obviously that followed the question of whether it was the stimulus package, whether it was pent-up demand, whether it was back to school, which we don’t haven’t had at school, in person, in quite a while.

So we’ve seen this huge increase in foot traffic, consumers going to malls. In fact, we have even seen a decrease in bankruptcies, as indicated by the Retail in the Red report. So the question is going to be, well, what’s– what’s going to happen in the future?

Exactly. And let’s talk about it. Because I mentioned the numbers, 24 malls, over 37 million square feet. So what becomes of these? Is this a huge graveyard of commercial real estate across the country? Or will a company come in to fill that void and build new malls?

NATALIE KOTLYAR: So we’ve seen it happen before, maybe not to this extent. But we have seen some malls become hospitals, housing, retirement 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 it’s not new. This may be a bit more drastic and quicker change to close stores. But that’s nothing new from a mall perspective.

RACHELLE AKUFFO: And just very quickly about 30 seconds. What sort of reimagining of these spaces might we see in the future 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 real estate agents can still get their rents?

NATALIE KOTLYAR: So I think they’re going to, as I mentioned before, they’re going to go into warehousing, which doesn’t really affect the consumer unless it’s closer to home, they’ll get their products faster, that they become gymnasiums, that they become centers for urgent care in all these different areas. So there is certainly a thoughtful conversion of these malls.

RACHELLE AKUFFO: Very well. Well, the mall is not dead yet according to Natalie Kotlyar, National Managing Partner of BDO, the national industry leader in industrial groups and retail and consumer products. Thank you so much.