America’s third place was, unsurprisingly, sought-after real estate. Sears would go on to purchase many of the malls its stores anchored, doubling down on a bet that a nation, growing in both numbers and prosperity, would continue to congregate in shopping-centric suburban spaces.
As we know, they were wrong.
According to this article by the WSJ, even the most well-positioned malls have seen their value dwindle, while lesser malls are owned by creditors, desperately hoping to be bailed out by an adaptive reuse project. Sears ultimately spun its real estate holdings into a REIT called Seritage Growth Properties (SRG); its lingering market cap letting investors continue to lose money on Sears-anchored shopping malls, years after the operating business had declared bankruptcy.
It’s instructive to examine exactly what made their thesis wrong.
The throwaway answer is that suburban malls were killed off by online retail, especially from Amazon. This answer is unsatisfying, however, as Walmart and Costco continue to print record profits every year. Americans still shop in person.
Instead, it appears that what killed the mall is not Amazon, but Starbucks; or at the very least, the evolution of the cultural zeitgeist that Starbucks represents (and that made Howard Schultz a billionaire). That is, at some point in the last 30 years, the mall was no longer the “Third Place” for America.
We started going back downtown and hanging out at coffee shops. Once this change began happening, it kept happening. People began hanging out where the people were hanging out. The virtuous cycle for the urban core became the mirror image of the vicious cycle for the suburban mall.
Ironically, it is precisely the mallrats with no shopping agenda that made shopping malls successful.