Macy’s Store Closings Will Change Shopping Malls

Macy’s The decision to close nearly a third of its stores will cause changes in malls and communities across the United States

Some of these transformations may surprise buyers.

In late February, the retailer announced plans to close about 150 of its namesake stores by early 2027. Macy’s has not yet said which stores it will close. When CEO Tony Spring announced the move, he said the stores Macy’s will close represent 25% of the company’s gross square footage but less than 10% of its sales.

The company plans to invest more in the roughly 350 remaining namesake stores and open new locations for its best-performing brands: upscale department store Bloomingdale’s and beauty chain Bluemercury.

But the closures are the latest catalyst for malls to adapt to changing consumer tastes. Macy’s is closing stores as the growth of online shopping and demographic shifts mean some smaller cities or regions can no longer support bustling malls.

Macy’s closing will ultimately be a good thing for many malls and shoppers, said Chris Wimmer, a senior director at Fitch Ratings who tracks real estate investment trusts. The department store’s exit will hasten the inevitable demise of “low-quality malls that really don’t need to exist anymore.” The closures will give mall owners a healthier life an opportunity to breathe new life and new relevance into a shopping center.

In those malls, which tend to have better locations and owners with stronger balance sheets, he said, landlords “are eager to get their hands on their Macy’s” and free up prime real estate.

Macy’s owns the majority of Macy’s stores. This dates back to the days when mall owners offered department stores space to attract customers and make money by charging rent to other retailers.

The Macy’s closures will also pave the way for real estate projects that might better fit the demographic or economic changes in their surroundings, whether that’s a medical facility, a retirement community or a grocery store.

But he acknowledged that some of the closed Macy’s stores could be harder to sell, and that their exit could be the nail in the coffin of a mall that is becoming an eyesore.

“If it’s in a really bad location where no one wants to spend money to tear it down, then it could rot,” he said.

Macy’s is cutting locations as department stores and malls shrink.

Macy’s has already exited many malls. The retailer has closed more than a third of its namesake stores in the past decade. As of early May, the company had 503 Macy’s stores, including a small number of other concepts outside of malls.

Other brands that have downsized or disappeared from malls include Sear’s, Lord & Taylor and JC Penney.

The number of shopping centers has also declined. Real estate agencies typically divide shopping centers into classes A and B, which have higher occupancy rates and lower sales density, and classes C and D, which have lower occupancy rates and higher sales density.

According to reports from companies S&P Capital IQ and Coresight Research, there were 352 malls classified as A and B at the end of 2016. That number fell to 316 at the end of 2022.

The decline is most pronounced among Class C and D malls, which fell from 684 malls in 2016 to 287 in 2022, according to the companies’ research.

Weak American malls got weaker and strong malls got weaker “Malls are places where all retailers and consumers want to be,” said Anand Kumar, associate director of research at Coresight. He expects that trend to continue. By 2030, he said, high-end malls will attract a larger share of total mall spending and more lower-tier malls will close or be forced to convert more space to nonretail uses.

In some struggling malls, Macy’s may be the last remaining anchor.

Kumar said the U.S. doesn’t need as many malls because customers are buying more on retailers’ websites. He added that many of the fastest-growing retailers in terms of store count, such as Dollar General, Five below And TJ MaxxI prefer to be in suburban shopping malls rather than in shopping centers.

He said adding more diverse tenants to malls, such as medical buildings, coworking spaces, nail salons and restaurants, may be a smarter move for mall owners to increase traffic.

That’s what many mall owners have done and could do with vacant former Macy’s locations.

Even if a mall wants to fill a Macy’s space with a retailer, few tenants can fill the entire space, said Naveen Jaggi, president of retail advisory services at JLL. Those that can, like Nordstrom and Belk, typically don’t open the megastores they have in the past, he said.

Macy’s stores typically range from 200,000 to 225,000 square feet.

If history is any guide, former Macy’s stores are likely to be transformed into spaces and projects that will surprise mall-goers. The closure of major malls has paved the way for new apartment complexes and entertainment spaces with restaurants, amusement parks and activities like laser tag and rock climbing.

Since 2012, Brookfield Properties, a major mall owner, has rebuilt more than 100 anchor malls with capital investments of more than $2 billion.

Stonestown Galleria is one of the shopping malls renovated after a Macy’s closed. In this San Francisco mall, a former Macy’s now houses a Whole Foods, a movie theater, a sporting goods store and a health facility.

At Tysons Galleria in the Washington, D.C., area, Brookfield took advantage of the Macy’s closure to create a new wing. It opened in 2021 with expanded entertainment options, including a bowling alley and movie theater; home furnishings stores, including RH and Crate & Barrel; new dining options; and a showroom for electric vehicle brand Lucid Motors.

These projects take time and money, says Adam Tritt, director of retail portfolio development for Brookfield Properties in the U.S. As part of the San Francisco transformation, Brookfield had to raise the roof height, add more windows and install a glass storefront.

These projects show that for mall owners, closing an anchor store like Macy’s can have positive effects, Tritt said. It opens the door to more flexible and creative uses that draw more people to the mall.

“There is a collective challenge to get people off the couch and out of the house,” he said.

And by converting a large area into smaller retail or restaurant spaces that can be rented, the mall owner can be more agile.

“We’re able to break it down into smaller, more digestible pieces, so as trends evolve and communities evolve, we’re able to respond more quickly,” he said.

In other malls, the tenants replacing a Macy’s might be even more unique.

Near Salt Lake City, Utah, a former Macy’s store will soon become the training and practice site for the NHL’s new hockey club, the Utah Hockey Club, complete with rinks and corporate offices.

And in some parts of the country, the shift from shopping in malls to shopping on their couch has taken a physical form. Amazon opened a massive distribution center on the former site of the Randall Park Mall. The northeast Ohio mall struggled with declining occupancy and eventually lost key retailers including Dillards, JCPenney and Macy’s.

And earlier this summer, Amazon opened another distribution center in Baton Rogue, Louisiana, also on the site of a former shopping mall.