The Evolution of Regional Malls as Big-Box Stores Become Obsolete

What Exactly Are Big-Box Stores?

In the 60’s, the first of the so-called big-box stores started to enter the retail landscape. The massive establishments derived their characterizing name from their physical appearance. Located in large-scale buildings or as the anchor stores in shopping malls, most would occupy a footprint of more than 50,000 square feet.

Their basic designs often were characteristic of a big box. These retailers’ nature was to carry all the non-perishable goods a household might need to function, including clothing, shoes, toys, tools, and sporting goods. Consumers’ reliance on these outlets made Target, Sears, Walmart, and Kmart into household names.

The Change of Retail Landscape

Things have not been so good for big-box retailers in Canada as of late. The closing of Target, Rona and Sears across the country exemplifies the digital age’s casualties and, more recently, those of the COVID-19 pandemic.

For decades, big-box retailers brought credibility to malls and shopping centers. Their presence seemed to create an environment of confidence among smaller businesses considering tenancy and created a cachet among consumers. This “anchor effect” would drive occupancy and build community. Today, landlords are faced with large vacancies because there isn’t always another giant to fill the space once occupied by Sears.

Mall Landlords Get Creative

When an anchor tenant “goes dark,” landlords are faced with few choices. They can attempt to fill the space with another anchor tenant like Walmart, Costco, or Nordstrom, which continue to do well across Canada. Alternatively, mall planners re-envision the space once held by the big boxes to accommodate multiple smaller retailers like Apple, Winners, HomeSense, or one of many chain restaurants. Despite these limited choices, like a phoenix from the ashes, regional malls in Canada are emerging with a new life and a modern form. Fueling this emergence is a creative look at space utilization.

According to the Retail Council of Canada’s 2019 Canadian Shopping Centre Study, landlords are taking a multi-pronged approach to the future of retail. In contending with e-commerce and other external variables, mall owners are also re-thinking tenant mix.

The creative use of space is essential, but it’s unclear whether this will be enough to buoy malls through the next decade. Online shopping is a 24x7x365 enterprise, and that’s hard for brick-and-mortar retail to compete with. Here again, landlords are looking to turn conventional thinking about mall space upside down. To bring shopping areas closer to the consumer, some mall landlords are looking at integrating residential units and office space into their footprint. Many Landlords including Oxford at its Yorkdale Shopping Centre are petitioning the City of Toronto for permitting that includes a boutique hotel and a a mixed use community.

As malls continue to morph with modern shopping needs, they’ll become destination spaces that combine work, play, and home life. The final shape of that is to be seen. One thing is reasonably certain; there will be a lot fewer big box stores.

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