The Demise Of The Mall

A combination of the two is presently generating the highest returns on investment in retail today.

People start out by finding a product online, and then go to the local mall to try it on, touch it, and feel it. Apple does this. Research shows that two-thirds of Millennials prefer buying their clothes and shoes at malls. Once there, the probability of a serendipitous purchase is far greater than online, anywhere from 20% to 60% of the time. This explains why pure online businesses by the hundreds are rushing to get a foothold in the highest end malls.

Immediate contact with a physical customer gives retailers a big advantage, gaining them the market intelligence they need to stay ahead of the pack. In “fast fashion” retailers such as H&M and Uniqlo, which turn over their inventories every two weeks, this is a really big deal.

There’s more to the story. Malls are not just shopping centers; they have become entertainment destinations as well. With an ever-increasing share of the population chained to their computers all day, the demand for a full out-of-the-house shopping, dining, and entertaining family experience is rising. Notice how merry-go-rounds have started popping up at the best properties? Imax theatres are spreading like wildfire. And yes, they have climbing walls, too. I haven’t seen any paintball courses yet, but the guns and accessories are for sale.

And notice that theaters are now installing first-class adjustable heated seats and will serve you dinner while the movie is playing. (Warning: If you eat in the dark, you will end up wearing half of it home.) This is why all of the highest rated malls in the country are effectively full. If you want space there you have to wait in line. REIT managers pray for tenant bankruptcies so that they can jack up rents on the next incoming client or pivot their strategy toward the newest retail niche.

Malls also are in the sweet spot in the alternative energy game. Lots of floor space means plenty of roof space. That means they can cash in on the 30% federal investment tax credit for solar roof installations. Some malls in sunny southwestern states are net power generators, effectively turning them into mini local power utilities.

Fortunately for we investors, we are spoiled for choice in the number of securities we can consider, most of which can now be bought for bargain basement prices. Many have a return on investment of 9% to 11%, a portion of which is passed on to the end investor. There are now 25 REITs in the S&P 500. The sector has become so important that the rating firm is about to create a separate REIT subsector within the index.

View single page >> |

The Diary of a Mad Hedge Fund Trader, published since 2008, has become the top performing trade mentoring and research service in the industry, averaging a 34.84% annual return for ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.