Upscale Shopping Centers Nudge Out Down-Market Malls

April 20, 2016

A few years ago, Restoration Hardware had three Denver-area stores scattered in malls. Today, the furniture chain has just one new one: a palatial, four-story gallery with a rooftop garden.

Retailers from Gap Inc. to Abercrombie & Fitch Inc. are abandoning a decades-old strategy of growing sales by blanketing cities with stores as consumers do more of their shopping online and less at the mall.

The shifting shopping habits have prompted chains such as Williams-Sonoma Inc. and Macy’s Inc. to close stores in secondary malls to focus on web sales and more upscale shopping centers. 

Restoration Hardware Holdings Inc. closed its three older Denver-area stores and last fall opened the 70,000-square-foot flagship at the Cherry Creek Shopping Center, an upscale mall that also is home to Burberry and Brooks Brothers.


Restoration Hardware declined to discuss its new approach, but its change in direction is part of a redesign of the nation’s commercial centers—a reversal of the “malling” of America. 

“With technology, retailers don’t need that extra store in a marginal market,” said William Taubman, the chief operating officer of Taubman Centers Inc., which owns Cherry Creek and mainly operates high-end, or so

called “A” malls. That is widening the gap between the country’s most productive malls and weaker properties, executives and analysts said.

Once-solid regional “B” malls that thrived for years are losing shoppers and tenants to the “A” malls—those with sales per square foot in excess of $500, according to Green Street Advisors. 

The research firm estimates that about 44% of total U.S. mall value, which is based on sales, size and quality among other measures, resides with the top 100 properties, out of about 1,000 malls. 

Almost all of the 40 stores that Macy’s closed last year were in “B” or “C” malls, according to Green Street. For already weak malls, the loss of an anchor can accelerate a downward spiral that leads to other vacancies.