In the new economy, the modern American mall is facing extinction. The rise of one-click shopping means that more and more of us get nearly everything delivered to our homes without making a trip to a physical store. The economy is changing as we shift to websites like Amazon for all of our random shopping needs, and that’s decimating the retail sector. In the not so distant future, you will see scary amounts of commercial retail space empty, as cyber sales become increasingly more mainstream.
The statistics are pretty grim for people who own commercial real estate. According to a report by real-estate services giant Cushman and Wakefield, between 2010 and 2013, retail trips during Christmas shopping season have dropped by half. That same report claims that 15% of U.S. malls will be converted into non-retail space or will fail entirely within the next 10 years.
Wall Street already sees the writing on the wall. Last year Amazon surpassed Walmart in total market value. We’re getting close to the tipping point in the industry where online retailing becomes such a viable option that traditional brick and mortar businesses simply can’t compete. When you have to pay rent and run a physical space, it’s nearly impossible to compete head-to-head with a website-based retailer.
Given that physical retail is facing a horrific downturn the big question is: what are we going to do with all of the commercial space that will soon be unnecessary in the cyber economy? Especially in suburban America where there is a seemingly endless amount of retail lining every major road, the thought of empty storefronts littering our thoroughfares is pretty disturbing.
Fortunately, with changing demographics, the likely case scenario is that yesterday’s commercial space will be repurposed into the housing of the future. Millennials already favor higher densities and smaller living spaces and would be willing to rent or buy apartments in developments that have been repurposed out of dying retail. The dead malls of yesterday could be the cool, urban, and affordable housing that our boring and expensive suburbs need.
Right now, there are already examples of repurposing old commercial areas into new hip residential developments. In fact, America’s very first indoor shopping mall in Providence, Rhode Island was turned into a micro-apartment project. These small spaces have become more popular as housing prices have spiraled out of control, and people want to live closer to work.
Repurposing commercial areas into residential areas will be a win-win for everyone. There will be little need for additional infrastructure (like roads, water, and sewer), so these housing developments could be much more affordable. Housing is completely unaffordable for millennials who are strapped with student debt and are facing a tough job market. If we turned half of the commercial areas in the United States into residential, it would help alleviate the ongoing housing crisis.
Online shopping will continue to change the economy and those changes won’t all be bad. Like any other technological advances, it simply reshuffles the cards and changes the game of doing business. The United States has too much retail space and not enough housing. Repurposing the excess amount of retail into housing makes economic sense. If regulatory barriers such as local zoning laws don’t stand in the way, mass repurposing could be a huge windfall to the average American consumer.