The shopping mall death spiral
Did the people who built this think it would fail in less than a generation? The answer might surprise you.
The shopping mall is the epitome of America's Suburban Experiment. From a local government standpoint, it was the golden chalice of development, a winner-take-all prize in our race to the bottom. Whoever got the mall was able to steal from their neighbors that fraction of a sliver of retail taxes that local governments receive. When consolidated in one place, that could add up to a significant amount of money, at least for a while.
The losers with their crumbling downtowns.....well, they could eat cake.
Until now. As kind of an indicator species in this great auto-oriented paradigm we've created, the shopping mall is in what one industry insider calls, "a death spiral." This dinosaur of another age is finding it hard to exist amid an ecosystem that has more nimble, adaptable competition.
“We are extremely over-retailed,” said Christopher Zahas, a real estate economist and urban planner in Portland, Ore. “Filling a million square feet is a tall order.”
That's what happens when we have a one-size-fits-all tax system mashed together with a winner-takes-all development pattern; we end up with too much of the easiest thing to generate quick cash with.
In the Curbside Chat presentation, I present two similarly-sized pieces of property. One is the highly-coveted big box store with an auto-dealership and gas station on the edge of town. The other is the run down, neglected downtown with all of its vacancies and burned down buildings that are now parking lots. The headline from the comparison is that the downtown -- despite being old and not having a real competitive set of offerings -- is worth 78% more than the big box complex. It dominates in the enduring wealth category.
Slide from the Curbside Chat presentation. These properties are roughly the same size, just a different approach to their development. Orderly-but-dumb versus chaotic-but-smart. Fragile versus adaptable. Unproductive versus incredible long-term productivity.
Even if this were not the case -- although the Urban 3 folks let us know that it pretty much always is -- the Strong Towns subtext of the comparison is what matters most.
When that big box store closes -- and it will someday -- what happens then? What replaces it? These buildings, their parking lots and loading docks aren't designed to last more than a couple of decades. When the site is no longer viable for the scale of retail that it was built for, what is its next life?
There are all kinds of brilliant people working on "sprawl repair", as if cities will have the capital, not to mention the desire, to convert their malls and big box stores way on the edge of town into walkable urban villages. Why not just fix your existing walkable urban village (or move to one that is being restored)?
“That’s charming, but where’s the tax base?”
There are also many example of these buildings receiving a second life as churches, Salvation Army depots and public buildings. That's charming, but where's the tax base? These buildings require millions of dollars of pipes, streets, sidewalks and curbs to function. When they were originally built, loose money from the Fed along with a myriad of federal, state and local tax incentives made it easy for the Wal-Marts and Bass Pro's of the world to absorb these costs. Now the cost of maintenance is the city's, i.e. the local taxpayer.
Walking away from these really bad investments would be easy if it weren't for the fact that most cities use these "investments" to juice horizontal growth in other, less-accessible areas. So you can not replace that pipe, but then you have to deal with the plethora of housing subdivisions, low-value retail and storage sheds upstream.
Contrast this with the traditional development pattern of the downtown. When one of those businesses close, what happens? We all know; something else takes it place. In our nasty downtown here I've seen -- in my short life -- one storefront be home for dozens of different things, from a pizza restaurant to office space to retail establishment. Downtown, we may not be able to get 48 different kinds of mustard in the same store where I can buy car tires and flannel underwear, but we're also not going to go broke as a community.
It's the malls threatened today. The big box stores will be the next species to falter and go on the endangered list. Strip malls and drive-through restaurants may hang around longer and may, in some places, find ways to adapt, but their general model is going to die as well. Cities that tethered their future to this experiment are going to struggle while those that still have a pulse in their core neighborhoods will have a chance at renewed prosperity.
The time to adopt a Strong Towns approach is now.