January 12, 2026

The reinvention of America’s shopping malls

Changes in shopping habits have widened the split between those catering to well-off customers and those facing bankruptcy 

Gregory Meyer in Bensalem, Pennsylvania

Santa Claus was having a slow afternoon at the Neshaminy Mall in Pennsylvania, sitting alone on his velvet throne in a hallway of empty shops during the week before Christmas.  

“So far I think I’ve had, like, three,” says the man behind the flowing white beard, a 74-year-old retired flooring installer named Frederick Spier. Guide ropes for the hoped-for lines of photo-seekers were not required.   

Places such as Neshaminy, on the north-eastern outskirts of Philadelphia, are on the losing side of an end game playing out among US shopping malls, the air-conditioned palaces of consumerism that sprang up next to the highway off-ramps of America’s postwar suburbia.  

 In 2024, it was sold for $27.5mn, barely more than the $25mn spent on its construction over five decades ago. The buyers, two local property developers, plan to tear most of it down.  

In the meantime the spaces once occupied by Sears and Strawbridge & Clothier, its two anchor tenants, are walled off. Other storefronts are largely deserted but for a Boscov’s department store and a Barnes & Noble bookstore. There is a wedding hall, a massage spa and a church. 

Less than 30 miles west along the Pennsylvania Turnpike, the tenant roster at the King of Prussia mall includes French and Italian boutiques such as Dior, Hermès and Versace. Midwest beef cuts at Morton’s The Steakhouse start at $59. Its latest addition is Netflix House, run by the streaming giant and containing an escape room, virtual reality experiences and a cinema. Footfall was up 10 per cent year on year during the holidays, according to mall owner Simon Property Group.  

High-end malls have never had higher takings than now, their landlords say; Simon says King of Prussia generates more than $1.5bn a year. “The good malls are doing better than ever. The bad malls are more challenged than ever,” says John O’Connor, head of acquisitions & development at O’Connor Capital Partners, a property owner.   

Annual sales per square foot at so-called class C malls are often below $400, while premier class A malls — the hosts of the Apple Store and Louis Vuitton — can bring in more than $1,000, according to Green Street, a real estate research group.  The top 100 of America’s roughly 900 shopping malls represent about half of the sector’s asset value, according to Vince Tibone, Green Street’s mall research sector head.  

The bottom 350 account for just 10 per cent. Tibone describes them as “melting ice cubes” that are likely to disappear over the next decade, sold for the value of the land they stand on. “You see that the market is bifurcating a bit more,” says Vincent Rouget, chief executive of Unibail-Rodamco-Westfield, the Paris-based owner of malls in the US and Europe.

The battle to survive reflects the transformation of the US retail landscape over the past 15 years. Shopping habits increasingly involve ecommerce, including shoppers who stop by stores to pick up their digital orders.  

The King of Prussia version of the US consumer economy is largely powered by wealthier households, enriched by booming stock and housing markets, while lower-income Americans face a mounting affordability crisis that is driving them to hard discounters and dollar stores.  

Eli Simon, chief operating officer of Simon Property, acknowledges the upheaval sweeping through the industry. Only two of the real estate investment trust’s top 10 tenants at the time of its 1993 initial public offering are still in business, he points out. “That’s not ‘two of the 10 are still our tenants today’. It’s ‘two of the 10 still exist’.” 

The Southdale Center, opened in 1956 in a Minneapolis suburb, was America’s first enclosed, climate-controlled mall. Victor Gruen, its architect, was a socialist and Austrian Jewish refugee, and claimed the shopping hub would unite communities dispersed by the automobile.  

Instead, malls fuelled urban sprawl along America’s highways and around the peripheries of its cities during the country’s postwar economic boom, hastening the demise of downtown commercial areas. Per person, mall square footage is more than 12 times higher in the US than in the UK, France or Germany, according to Moody’s Ratings. 

But in recent years, US malls have faced their own brutal reckoning. Tibone divides their decline into two phases. First came the global financial crisis of 2008-10, which caused a sharp contraction in consumption.  

That was followed from around 2015 by the rapid rise of ecommerce, supercharged by the Covid-19 pandemic starting in 2020. This period drove a deep wedge between the strong and the weak. Even before Covid lockdowns, occupancy rates at class C and D malls had fallen by 26.4 percentage points between 2016 and 2019, according to Coresight Research. Occupancy at class A and B malls dipped by just 1.1 points.   

The divergence rippled into financial markets. The rate of late payments on loans to regional malls has reached 18 per cent, more than four times higher than for loans backed by other types of retail property, according to Moody’s. “In any region there is a group of winning malls and losing malls, and the winners are the destinations able to attract new and changing tenants,” says Moody’s analyst Darrell Wheeler. 

 Behind the shop fronts, the business models of malls changed radically. In the days when they were springing up across the country, securing financing was dependent on attracting anchor tenants such as Sears, Dayton’s, Lord & Taylor and Macy’s — department stores whose vast curated assortments and marketing prowess drew hordes of shoppers.  

“There are plenty of instances where developers would give [department stores] the land for a dollar, and would even improve the land, would even build the parking for them, put in all of the improvements, basically give them everything,” says Carl Goertemoeller, executive director of the University of Cincinnati Real Estate Center and a former senior vice-president of real estate at Macy’s.  

 “The developer made his money leasing the small shop space in between the department stores,” Goertemoeller adds. These so-called in-line tenants usually generate about 50 to 80 per cent of mall revenue, according to Moody’s.  But the internet wrecked department stores’ profitability, prompting a wave of high-profile failures and consolidation across the sector, with luxury operator Saks Global the latest to begin preparations for bankruptcy. Macy’s is one of the few survivors.   

“I’m a big believer in the department stores,” Tony Spring, Macy’s chief executive, told the FT Future of Retail Summit late last year, calling them a “modern marketplace” where shoppers can buy in multiple categories, brands and price points under one roof or online.   

Yet even Macy’s is in the process of winnowing its footprint by 150 stores under Spring’s “bold new chapter” strategy, leaving about 350 namesake locations around the country. On the eve of the Covid pandemic, there were 550 stores with Macy’s above the doors. “It used to be that department stores would drive traffic. That, of course, doesn’t happen anymore,” says Bryan Gildenberg of Retail Cities, a consultancy. The internet, he says, has replaced department store merchants in identifying and democratising trends.  

But anchors can be difficult to dislodge even if they are floundering, as they hold multi-decade leases with generous renewal options that reflect their historical power with mall developers.   

In some cases they own their buildings. At Georgia’s moribund Gwinnett Place Mall — deployed as a setting for the 1980s-themed Netflix series Stranger Things — a local development authority agency paid Macy’s $16.5mn for its department and furniture store sites.  

Costly buyouts can work commercially, because land where a single tenant was paying $1 per square foot can be subdivided and bring in 20 times that, O’Connor says.  Landlords are ripping down or repurposing old department stores and finding new uses for the spaces they occupied: supermarkets, hotels, medical offices, go-kart tracks, miniature golf courses and bowling alleys.  

Suburban US malls were once distinctly separate from residential areas dominated by single-family homes, but that too is changing. Centennial, a retail real estate investor, and its partners have added apartments at malls in California and Illinois. “We took old department store boxes that were vacant and parking fields that were empty and put residential there,” says Paul Kurzawa, Centennial’s president.   

Two of Southdale’s three anchor department stores have been transformed into a co-working space, a pickleball centre and a grocery store, while a 232-unit apartment building and a hotel have risen at the edges of the property. These days, Southdale is also owned by Simon Property, the largest mall landlord in the US. The Indianapolis-based group is no stranger to the struggles of regional malls, with some of its properties defaulting on their mortgage loans. 

But it is also an owner of some of the healthiest malls in America, with dozens of class A to A++ properties such as Southdale, King of Prussia and Roosevelt Field on Long Island, about 20 miles east of Manhattan. Each of these are at least 95 per cent occupied. Net operating income from Simon’s portfolio rose by 4.5 per cent in the first nine months of 2025, to $4.5bn.   

Sitting inside Roosevelt Field early one December morning, as visitors taking exercise roam the halls before the shops’ doors open to customers, Simon tells the FT that the exit of legacy anchors represents an “incredible opportunity” to improve undervalued property. At Phipps Plaza in Atlanta, he says the group removed a Belk department store paying less than $1mn in rent annually and converted the space into a food hall, a Nobu Hotel, a three-storey Life Time athletic club that has co-working and a rooftop pool, and a class A office building. Those amenities in turn attracted luxury brands such as Hermès.  

The building will add $35mn in net operating income, according to Simon.  “We look at malls in our portfolio as living, breathing organisms,” adds Simon, who is the grandson of one of the group’s founders. “If the mall’s not getting better, it’s getting worse.”  

Executives at mall owners are faithful to Gruen’s community vision in an age of online isolation; shoppers can order halter tops from the website of women’s fashion retailer Edikted, but they cannot hang out with their friends there.  The Gen Z customer “wants to shop in real life”, Simon says. At Roosevelt Field, one such consumer agrees.  

“I’m pretty sure I’ve been here a solid eight times since Black Friday,” says Christina Macaluso, a 26-year-old therapist. She spends long hours in front of a screen doing remote consultations with her clients and says it is “just nice to actually be here in person and interact with people.” 

In an age when buying online and picking up or returning goods in stores is a growing part of ecommerce, malls have lost share to open-air retail parks dominated by big-box chains such as Walmart, Target and Costco. Walmart, the world’s largest retailer, recently purchased the Monroeville Mall near Pittsburgh and plans to demolish and redevelop it into new retail, restaurant and entertainment space, according to an application for $7.5mn in subsidies filed with a Pennsylvania state agency.   

Maurice Zekaria, principal at new Neshaminy co-owner Paramount Realty, says he plans to knock down his mall but for the Boscov’s and a cinema, and replace it with open-air shops, restaurants and housing. “It’s all about convenience and time. People don’t want to park the car and go walk the mall for hours,” he says. Kevin McCrain, chief executive of property owner GGP, counters that open-air centres lack the variety of a mall. “Teenagers can’t go walk around for three hours shopping and browsing at an open-air centre because they’re going to have to walk it 16 times back and forth,” he says.  

 GGP, the retail real estate division of Canadian asset manager Brookfield Corporation, owns about 100 retail assets including premier malls such as Tysons Galleria outside Washington and Kenwood Towne Centre in Cincinnati. It is in the process of selling its lower-rated properties, including Neshaminy Mall in 2024, as the company says it “plans to reduce the size and further improve the quality of our retail portfolio”. “In any asset class, there’s always going to be great assets and not-so-great assets. We are fortunate that we have a portfolio of great assets that we’re focused on,” McCrain says.  

The malls with the dimmest outlook have been selling for a fraction of their value to specialist investors such as Kohan Retail Investment Group and Namdar Realty Group, whose properties are largely rated class C and D.  

“They’ll recoup their money from the rents in that they cut expenses to the bone,” says one veteran retail property adviser.  They have been accused in lawsuits of failing to pay utility bills and neglecting maintenance at their malls. A visit to Kohan’s Livingston Mall in New Jersey after a snowstorm revealed an unploughed car park scattered with potholes. 

Mike Kohan, principal, says: “Our approach is operations-first: support tenant performance, maintain a safe and welcoming environment, and adapt the mix to what each market demands.”  

Namdar said in a statement that bringing older malls into a new era was costly, adding that many municipalities “aren’t quick to step in” when zoning limitations stall redevelopment or an operator goes bankrupt. “Our strategy, while not an overnight solution, focuses on supporting local and national tenants and maintaining operations as each property’s best long-term use case is being determined.”  

The pressure on weak malls is being compounded by financial strains among lower-income Americans. Spier was a 22-year-old newly wed when he and his wife first visited the Neshaminy Mall to buy an Old English sheepdog. “This place was booming at the time,” he says. He supported his family over 35 years, laying carpet, ceramic tile and floor planks, and bought a house nearby. But after retiring and losing his wife to illness, Spier cut back on most shopping and says he ran out of money to pay for heating oil this winter.  

He has taken out a reverse mortgage to extract cash from his home. His shopping trips now take him mostly to second-hand stores and sometimes Walmart, which has a bustling outlet on the opposite side of the highway from the Gruen-designed mall. His decision to put on a Santa suit and return to Neshaminy was driven by this budget crunch. “I don’t really go to any malls,” he says. “I mean, I’m here working — but I’ve stopped doing the malls.” 

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