A customer walks into the Macy’s department store at Bay Fair Mall in San Leandro, California, which will close on February 27, 2024.
Justin Sullivan | Getty Images
macy’s department store The decision to close nearly a third of stores will spark changes in malls and communities across the United States
Some of these shifts may surprise shoppers.
The retailer said in late February, Plans to close about 150 stores By early 2027, Macy’s will close its namesake stores. Chief Executive Tony Spring said in announcing the move that the stores Macy’s would close account for 25% of the company’s total square footage but account for less than 10% of sales.
The company plans to invest more in the roughly 350 remaining namesake stores and open new stores for its better-performing brands: high-end department store Bloomingdale’s and beauty chain Bluemercury.
However, the closures will become the latest catalyst forcing malls to adapt to changing consumer tastes. Macy’s is closing stores as the growth of online shopping and changing demographics mean some small towns or regions can no longer support bustling malls.
Chris Wimmer, senior director at Fitch Ratings, which tracks real estate investment trusts, said Macy’s closure is ultimately a good thing for many malls and customers. The withdrawal of department stores will hasten the inevitable demise of “low-quality shopping malls that really don’t need to exist anymore.” Closures will provide owners with healthier malls An opportunity to breathe new life and relevance into the shopping centre.
He said these malls tend to have better locations and owners with stronger balance sheets who are “eager to acquire Macy’s” and free up prime real estate.
Macy’s owns most of its namesake stores. This goes back to when mall owners gave department stores space to attract shoppers and made money by charging rent to other retailers.
Macy’s closing would also make way for real estate development, whether it’s building medical towers, retirement communities or grocery stores that might better fit the changing demographics or economies of the surrounding areas.
But he acknowledged that some shuttered Macy’s stores may be harder to sell, and their exit could be a nail in the coffin of a mall that is becoming an eyesore.
“If it’s in a really bad location and no one is willing to pay to tear it down, then it could rot,” he said.
Shoppers walk through the Fashion Center at Pentagon City Mall on February 2, 2024 in Arlington, Virginia.
Saul Loeb | AFP | Getty Images
Department stores downsize
Macy’s is shrinking its locations as department stores and malls shrink.
Macy’s has left many malls. The company has closed more than a third of its namesake stores over the past decade. As of early May, the company had 503 Macy’s stores, including a handful of Concepts other than shopping malls.
Other anchor brands have also downsized or disappeared from malls, including Sear’s, Lord & Taylor and JCPenney.
The number of shopping malls has also decreased. Real estate companies usually classify shopping malls into Grades A and B (higher occupancy rates and lower sales density) and Grades C and D (lower occupancy rates and higher sales density).
As of the end of 2016, a total of 352 malls were rated A and B, according to company reports, S&P Capital IQ and Coresight Research. By the end of 2022, this number dropped to 316.
According to the company’s research, C- and D-class malls have seen an even steeper decline, from 684 in 2016 to 287 in 2022.
The weak malls in the United States have become weaker, and the strong malls have become weaker. Anand Kumar, associate director of research at Coresight, said this is where all retailers and consumers want to be. He expects this trend to continue. He said that by 2030, top malls will account for a larger share of total mall spending, while more lower-tier malls will close or be forced to convert more space to non-retail uses.
In some struggling malls, Macy’s may be the last resort.
Kumar said the U.S. doesn’t need as many malls because customers are buying more on retailers’ websites. He added that many of the retailers that are growing fastest in terms of store numbers, e.g. Dollar General, Five or less and TJ Maxwanted to be in a suburban strip center rather than a shopping mall.
He said adding more diverse tenants to malls, such as medical buildings, co-working spaces, nail salons and restaurants, could be a smart move for mall owners to attract foot traffic.
That’s what many mall owners have done and could do with vacant former Macy’s locations.
Naveen Jaggi, president of JLL’s retail advisory services, said even if a mall wanted to put a retailer inside a Macy’s, it’s rare for a single tenant to occupy the entire space. Capable businesses like Nordstrom and Belk typically don’t open large stores like they did in the past, he said.
Macy’s stores typically range in size from 200,000 to 225,000 square feet.
Stonestown Galleria is an example of how malls have changed since Macy’s closed. Located in the San Francisco area, the mall houses a Whole Foods Market, movie theaters, sporting goods stores and a health care facility (the original location of the department store).
Courtesy: Brookfield Properties
Grocery stores, hockey rinks and Amazon warehouses
If history is any guide, the former Macy’s store will likely be transformed into a space that will lead to projects that will surprise longtime mall goers. The closure of mall anchor stores clears the way for new apartment complexes and entertainment venues with restaurants, amusement parks or activities such as laser tag and rock climbing.
Major shopping center owner Brookfield Properties has renovated more than 100 anchor boxes since 2012, representing a capital investment of more than $2 billion.
Stonestown Galleria is one of the malls that was renovated after Macy’s closed. At the San Francisco Mall, the former Macy’s now houses a Whole Foods, movie theater, sporting goods store and health care facility.
At the Tysons Galleria in Washington, D.C., Brookfield used the closing of Macy’s as an opportunity to build a new wing. It opens in 2021 and offers wider entertainment facilities, including a bowling alley and cinema; homewares stores including RH and Crate & Barrel; new dining options and a showroom for electric vehicle brand Lucid Motors.
Adam Tritt, chief development officer for Brookfield Properties’ U.S. retail portfolio, said these projects require capital and time. As part of the San Francisco renovation, Brookfield had to raise the height of the roof, add more windows, and install glass shops.
Tritter said the projects show there may be a glimmer of hope for mall owners closing anchor stores like Macy’s. It clears the way for more flexible and creative uses, attracting more people to the mall.
“Getting people off their couches and out of their homes is a collective challenge,” he said.
Mall owners can be more flexible by converting a large box into smaller retail or restaurant space that can be leased.
“We’re able to break it down into smaller digestible pieces so that as trends change and communities evolve, we can respond more quickly,” he said.
In other malls, the tenants that replace Macy’s may be more unique.
The former Macy’s department store is about to be built near Salt Lake City, Utah the position of becoming Training and practice facility for NHL newcomer Utah Hockey Club, complete with rink and corporate offices.
In some parts of the country, the shift in consumers away from shopping in malls and toward shopping from their couches is already taking a physical form. Amazon A large distribution center has opened on the former site of Randall Park Mall. Malls in Northeast Ohio struggled with declining occupancy and eventually lost mall anchors such as Dillards, JCPenney and Macy’s.
Earlier this summer, Amazon opened another Distribution center in Baton Rogue, Louisiana — also located on the site of a former shopping center.
