Store Closures Give New Life To Tired Shopping Centers And Malls

Persistent questions about tariffs and how rising prices will impact retail prospects this year have caused retailers to hit pause on opening new stores and signing retail leases, according to the Wall Street Journal.

After about 1,300 more stores closed than opened last year, real-estate firm Cushman & Wakefield reported the first quarter of 2025 was the weakest quarter in store leasing rates since the pandemic broke in 2020. Nearly six million more square feet was vacated in the first three months of the year than were occupied. The firm also said the rest of the year looks challenged as well.

Despite the current disruption in retail real estate, there are opportunities for retailers willing to bet on the resilience of American shoppers — a safe bet. Because retail property owners are currently experiencing a leasing slowdown, retailers have more bargaining leverage for new leases, making it a great time for more retailers to get physical.

Foot Traffic Up

Following a slow start in January and February, visits to indoor malls increased in March and April year-over-year, up 1% and 4% respectively, according to Placer.ai. Also in April, foot traffic to open-air shopping centers and outlet malls got a boost as well, both up 4%.

While the Easter holiday shift from March last year to April this year may be a factor, as well as pre-tariff shopping, Placer.ai’s Shira Petrack doesn’t think this explains it all.

She said a steep drop in foot traffic over the extended Easter weekend balanced any pre-holiday uptick. And the upward traffic trend continued the week after Easter. In addition, mall dwell time increased during the month across all formats.

Of course, mall foot traffic regularly varies from month to month and a single month’s uptick doesn’t necessarily make a trend. However, 2024 ended with an overall 2% increase for both indoor and outdoor shopping centers, suggesting favorable tailwinds.

“April 2025 mall data reveals a significant upswing in mall traffic across all formats along with an increase in average visit duration, demonstrating a recovery that extends beyond the influence of the Easter calendar shift,” she explained.

“These positive trends reveal malls’ continued role as key destinations for shopping and leisure – even in times of economic headwinds,” she continued.

Next-Generation Shoppers Want More Stores

Even though store closures way outnumbered store openings last year – 7,327 closures to 5,919 openings – next generation consumers crave the in-store shopping experience.

L.E.K. Consulting found 64% of GenZ shoppers, born between 1997 and 2012, prefer in-store shopping to purchasing online. In-store shopping is also preferred among 59% of Millennials.

GenZers are also hungry to shop. Some 39% say they are constantly in shopping and buying mode and 32% value a unique and experiential in-store shopping experience, far more than the older cohorts.

“We are seeing this incredible love of the mall by GenZ,” ICSC vice president of research and public relations Stephanie Cegielski shared with me. “As a digitally-native generation, they want to see the brands they’ve followed on TikTok and Instagram in physical locations and make it an experience. They also crave the social interaction in-person shopping gives.”

Since GenZers are forming shopping habits that will shape how they behave as they mature, their preference for the in-store experience is likely to hold, as will the clicks-to-bricks expansion of digitally-native brands to physical retail.

“Direct-to-consumer brands are finding how expensive it is to market digitally. It’s a very crowded space and a physical store is a living, breathing billboard,” Cegielski added. “These DTC brands are expanding rapidly because they understand shoppers want a full, real-life brand experience, not just a digital one.”

Leasing Demand Strong

Cigielski asserts that there is more demand for brick-and-mortar retail spaces than supply, with retail vacancy rates dropping to 5% in 2024, its lowest level in the past twenty years, according to Buxton’s “2025 Retail Real Estate Outlook.” However, indoor malls have more openings with 9% vacancy levels, compared with 4% in open-air “power” centers.

Yet, with the recent leasing slowdown, the previous seller’s market is shifting to a buyer’s market. Retailers may be able to negotiate more favorable rental rates, even as rents grew at a slower pace in 2024 than at their peak in 2022, 3% and 5% respectively.

Retailers also have more flexibility in term leases. Landlords have been moving toward shorter-term leases, especially important for DTC brands that are just exploring the brick-and-mortar space, and that trend will continue, with more even shorter-term pop-up opportunities available.

And there is more demand to carve up large spaces into smaller units, giving retailers more flexibility to optimize retail spaces toward more convenient and localized shopping experiences. The move toward smaller format stores is one that is sure to continue as Bloomingdale’s, Macy’s, Whole Food’s, Meijer, Walmart, Target, Nordstrom and Ikea are expanding in this way.

Mall Reboot

“The general consensus has been that everything is moving online, but that isn’t taking people away from wanting to shop in community spaces, like malls and shopping centers,” Cegielski said.

The rapid pace of leasing turnover, as old stores go out and new retailers come in, is revitalizing malls and shopping centers and creating more appealing guest experiences. “Mall composition used to be about 70% apparel and now its around 30%,” she shared. “Malls and shopping centers now are offering many different types of experiences that make them appealing destinations.”

While discount retailers have been filling many of the recent vacancies, there is more demand for not just dining, including both sit-down and quick-service restaurants, but other non-traditional experiential retail, such as medispas, activity centers, such as pickleball courts, trampoline parks, CrossFit gyms, and entertainment venues. These non-traditional retail tenants have accounted for some 15% of all leasing activity over the last two years.

“When I started with ICSC eight-and-a-half years ago, there was very much a distinction between physical and digital retail. Now both need to part of the overall business strategy or else you’re going to lose customers and miss out on critical revenue,” she said.

“Now everyone realizes that people still want to and will continue to want to come to a physical space. Despite online shopping and all the time people spend on social media, they still want to have real-world experiences, make it fun and have something to share with their friends and family. That’s what malls and shopping centers offer,” she concluded.