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Malls Are Dying Because the Middle Class Is Disappearing

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In the US, 3.4% of malls are more than 40% empty and in danger of falling into a "death spiral." That's according to the New York Times, reporting on the economic forces that have caused more than two dozen enclosed shopping malls to close since 2010 and tipped an additional 60 shopping centers closer to the brink of "dead mall" status. As the income gap widens, high-end malls are flourishing, but malls that rely on faltering anchor stores like Sears, Kmart and JCPenney are in danger.

In addition to the decline of middle class and working class consumers' spending power, a big problem for malls is a retail glut across the country, which makes it difficult to fill all that space. In 2006, 94% of America's malls reported vacancies in the healthy range of 10% or less and 5% reported vacancies of 10% to 40%. Today, 80% report vacancies of 10% or less and 15% report vacancies of 10% to 40%. The Times concludes that online shopping is only having a small effect on malls, because less than 10% of retail sales take place online.

Since the recession, any mall that doesn't cater to the wealthy is finding it harder to hold on. "There are B and C malls in tertiary markets that are dinosaurs and will likely die. A malls are doing well," Kimco retail exec Tom Simmons told the Times.

· The Economics (and Nostalgia) of Dead Malls [NYT]