Malls Redone: The Unexpected Retail Investment Renaissance

When people say malls are dead, I can’t help but push back. It’s not entirely accurate. Shopping centers and malls have undeniably evolved, but the narrative of their demise misses the bigger picture. 

Let me explain why I believe that shopping malls aren’t just surviving—they’re positioned to be incredible assets for investors. 

Shopping Centers are Adapting, Not Dying

There’s a distinction to make between shopping centers and malls. Malls are just one subset of the broader shopping center category. Shopping centers aren’t dead for a few reasons. First, Amazon and COVID-19 dramatically shifted consumer behavior, reducing trips to shopping centers and forcing weaker retailers to close. But the ones that survived? They adapted.

Amazon and COVID killed the weak guys. But the guys that survived are thriving because they’ve developed very effective e-commerce strategies. Retailers today aren’t just competing—they’re fighting back. 

They’ve got their own e-commerce distribution networks, they’ve got great apps, and they combine all of that with brick-and-mortar stores to create something very defensible. This combination of online and in-person experiences—the “trifecta” of e-commerce, apps, and stores—is now the backbone of successful retail.

Take TJ Maxx, Five Below, and Hobby Lobby, for example. These growth-oriented retailers have blended strong e-commerce platforms with a physical store network to defend and grow market share.

E-Commerce Needs Physical Stores to Survive

Here’s a fact many overlook: even in the digital age, e-commerce companies can’t thrive without a physical presence. I’ve seen it time and again. While traditional stores might now need e-commerce integrations, e-commerce stores similarly rely on physical brick-and-mortar stores to survive. 

Pure-play e-commerce companies (those without physical stores) face skyrocketing costs to acquire new customers as they grow. At first, it’s easy for these companies to get customers, but as they scale, the costs of ads, search placements, and retaining them go through the roof.

Physical stores, on the other hand, offer a cost-effective solution. Brick-and-mortar stores are the lowest-cost way to acquire new customers, protect existing customers, and protect your brand. 

Why physical stores matter:

1. Customer acquisition: New customers are drawn in through in-person experiences.
2. Customer retention: Stores build loyalty by providing a tangible brand presence.
3. Brand strength: Physical stores reinforce credibility and visibility.

This is why even companies like Warby Parker and Amazon have moved into physical retail. Retail isn’t dead—it’s transformed. The challenge now is finding space. Construction costs have gone up by 30% since COVID-19, and borrowing costs have risen too. 

Why Second-Generation Retail Spaces Are Key 

This lack of store space has found a very unique solution: second-generation retail space. These are retail buildings that previously housed different tenants but have been repurposed to fit an entirely different business. Existing retail spaces are more valuable now than ever because they fill the gap created by the rising costs of new construction.

For investors, this creates opportunities:

• Repurposing older spaces: Adapting second-generation properties to meet modern needs.
• Leveraging demand: Retailers want space, but there’s limited new supply.
• Maximizing returns: Lower acquisition costs for second-generation spaces offer higher potential yields.

We’ve done this in our projects. We’ve turned old department store spaces into sports complexes, grocery stores, and more. It’s all about taking what’s already there and making it work for today’s needs. In today’s environment, second-generation retail isn’t just valuable—it’s essential.

The Case for Malls and Shopping Centers 

When people claim malls are dead, they’re usually talking about outdated configurations. But even these so-called “dead malls” represent opportunities. Often, the architecture is obsolete, but the locations are prime for redevelopment. When malls are dead, you could say their current configuration is dead. But part of these malls can be reused for alternative purposes, and some can still function very effectively as retail.

One example from a RockStep Capital shopping center in Janesville, Wisconsin, shows how a mall property can be completely reimagined to serve the community. The Sears box there wasn’t working anymore, so the city invested $50 million to transform it into something new and fresh that drives real economic activity. It’s a sports complex with two sheets of ice for hockey and figure skating, 40,000 square feet for basketball and volleyball, and even a convention center. 

Communities are figuring out that youth sports tourism is a huge economic driver. When families come into town for tournaments, they stay in hotels, eat at restaurants, and spend money all over. What RockStep Capital and the city have done in Janesville is exactly the kind of revitalization that shows how malls can pivot to something that works for today.

Entertainment and Dining: The New Anchors

One of the most significant shifts in malls is the move away from apparel-focused tenants toward entertainment and dining. Decades ago, malls might have been 75% apparel. Today, that number is below 50%. Fitness centers, family entertainment, and experiential activities have replaced them.

Restaurants and entertainment aren’t just afterthoughts—they’re critical drivers of traffic. When people go out to eat, they want to be entertained. They want different food, to talk to their friends, see other people, and just look around. Restaurants are core to the future of malls.

Shopping Centers as Community Hubs 

Malls and shopping centers have evolved into community hubs. Neighborhood centers with grocery stores remain staples for local needs, while larger malls incorporate mixed-use developments. If a mall is too big for the market, you shrink it or eliminate some of the retail. Then, you bring in alternative uses—residential, fitness, sports complexes, medical offices, or even senior living facilities.

Mixed-use developments are becoming increasingly popular. They can include:

• Residential housing: Apartments, condos, or senior living facilities.

• Offices: Medical offices or co-working spaces.

• Entertainment: Movie theaters, sports complexes, or convention centers.

• Retail and dining: Ground-floor shops and restaurants that serve the community.

We’ve embraced this approach in several of our projects. By reducing retail space and integrating other uses, we’ve created vibrant, mixed-use developments that serve both residents and businesses. These projects help malls remain relevant by aligning with the needs of modern communities.

Why The "Dead Malls" Myth Survives

So why does the narrative of the “dying mall” persist? For one thing, it’s a compelling story. People can take one look at a quiet, old-fashioned mall and immediately label it as dead and abandoned. 

In reality, most of these so-called dead malls are being repositioned for new uses. The narrative just hasn’t caught up to the progress being made. For instance, a partially vacant mall today might already be slated for redevelopment into a mixed-use community hub.

Another reason for the “dead mall” myth is that many traditional malls have rapidly become outdated. The problem is that some operators don’t invest in keeping their properties relevant. They cut costs, don’t pay the bills, and upset retailers and communities. That gives the industry a bad name.

However, those poorly managed properties don’t reflect the majority of shopping centers today, which developers are transforming to meet modern needs.

Why Invest In Retail Now?

For investors, now is an excellent time to look at retail. The demand-supply imbalance works in retail’s favor—there’s more demand for space than there is supply. Combine that with positive leverage opportunities, and you’ve got a very strong case for investing in retail.

Retail offers: 

• Diverse opportunities: grocery-anchored tenants, power centers, and mixed-use developments. 
• Resilience: retailers are adapting and growing in response to challenges. 
• Growth potential: strategic investments in retail can yield high returns. 

Final Thoughts: Retail Is Alive and Thriving

The bottom line? Retail isn’t dead—it’s alive and thriving in a transformed state. Shopping malls and centers have proven resilient, adapting to economic shifts, technological advancements, and evolving consumer preferences. 

Whether through strategic redevelopment or thoughtful tenant mixes, shopping malls will remain integral parts of our lives for years to come. For investors, now is the time to recognize its potential and seize the opportunity. Malls are no longer just places to shop but to live, work, play, and connect.

The future of retail is bright, and those willing to invest in its transformation will reap the rewards.