If you were born before the turn of the millennium, there’s a good chance you grew up in and around the American shopping mall. These suburban superstructures were the quintessential emblem of culture and capitalism, their meteoric rise an integral chapter in the story of Americana. Malls weren’t just the backdrop for first dates and first jobs; at their height, they were a veritable barometer for the health of the U.S. economy.
That is, until they weren’t.
Abandoned and foreclosed-upon malls (known colloquially as “dead malls”) are having a moment. They’re the site for pop-up vaccination centers. Amazon has begun using them as fulfillment venues. Epic Games, the esports behemoth, is even making one into their new corporate headquarters. With every new dead mall story, we’re reminded that nearly one-in-five American shopping centers are no longer viable. We’re told that the dead mall is a symbol of complacency, a cautionary tale against burying our heads in the sand when progress comes knocking. Dead malls, so they say, are what happens when leaders fail to embrace innovation. It must be nothing short of poetic, then, that forward-looking tech giants like Amazon are repurposing the very spaces they helped make obsolete.
But, here’s the thing: that story isn’t true.
Malls aren’t dying because internet retailers put them out of business. They aren’t dying because of the 2008 recession. They aren’t dying because of the 2020/21 pandemic. They aren’t dying because today’s generation of teenagers prefer to socialize online. We’re given these reasons because they all seem like plausible explanations. But to suggest that any of them are what caused the demise of our retail meccas is the equivalent of suggesting that the Titanic sank because it took on too much water, whilst failing to mention the iceberg it collided with.
So what was the American shopping mall’s iceberg — its fatal flaw?
We simply built too many of them.
Back in 1996 — decades before the internet would revolutionize our shopping habits — researcher Thomas Hanchett published a paper in The American Historical Review effectively predicting the American mall’s future collapse. Now, remember: this was the mid-1990s. Malls were booming. So, how did Hanchett know?
Hanchett traced his argument back to 1954, when Congress passed a new tax law that legalized “accelerated depreciation.” Before this (dreadfully boring sounding) piece of legislation existed, there were only a few dozen shopping centers in the United States, because building malls in suburbia was an exceedingly high-risk, slow-return business proposition.
But that all changed in 1954, when Congress passed legislation that enabled developers to deduct capital depreciation at an expedited rate. To vastly oversimplify it, this meant investors could recoup their money much faster thanks to what amounted to a significant annual tax break. In fact, this new tax law stacked the deck to the point that investors would have a good chance of making money on a property regardless of whether it ultimately served its community well, or even survived in the long run (check out Hanchett’s paper for a far more contextualized explanation).
And so, developers built. And built. Investment money began to pour in.
The real estate industry didn’t just take advantage of this new tax law — they exploited it.
From 1950 to 1970, it was common for cities to have built five or six new malls, regardless of relative population growth. In Charlotte, for example, 45 shopping centers and five indoor malls were built during those two decades. But the city itself saw only modest population growth over that time, and from about 1959 to 1970, population rates were actually falling every single year.
All told, the U.S. built malls twice as fast as the population grew between 1970 and 2015. This didn’t trouble developers or their investors, because they didn’t have to worry about any long-term consequences; thanks to accelerated depreciation, they could extract substantial profit from the project in the short term.
The result of all this excessive development? Consider that in 2018, all but three countries on Earth had less than five square feet of retail space per capita. The United States, conversely, had 23.5 square feet of retail space per capita — more than five times the retail space per capita of any country in Europe.
All of this unsubstantiated, unsustainable growth was bound to collapse in on itself eventually.
And then, it did.
All of the reasons you typically read about that explain away the death of the American shopping mall — from the rise of online shopping to the economic recessions — these weren’t the causes. They were the accelerants. In fact, according to the U.S. Department of Commerce, online retail was still only about 16% of total retail sales in 2019.
The truth was always simpler, though perhaps ultimately more revealing: we built way too many malls. And something was bound to come along to shutter many of them.
Now, is the moral of this story that real estate developers in the mid-to-late twentieth century had uncharacteristically insatiable greed? I don’t think so. Take on a little elevation, and you’ll quickly find that this story weaves seamlessly with so many others that underscore a more relevant, albeit sobering lesson: human beings, when left to their own devices, make a lot of suboptimal decisions.
Granted, this takeaway isn’t as satisfying as burying the developers and investors of the past sixty years in populist rhetoric — but it is more accurate. After all, can you say with certainty that if presented with the opportunity to make a ton of money in the short-term without clear knowledge of long-term consequences, that you wouldn’t have done the same thing? Unfortunately, the research suggests many of us would have.
The evidence is all around us. Psychologists have shown that we’re more likely to take a smaller, short-term reward instead of waiting for a larger, long-term payout (this is known as temporal discounting). We see warning signs of irreversible climate change every day, but often fall short of the day-to-day sacrifices needed to benefit generations that will come after us. Our country’s most successful sports league continues to lengthen its season, despite the cautionary tales of leagues that failed to maintain their market dominance because of excessive saturation. Even before the pandemic, we were failing to go to preventative health screenings at alarming rates, and struggled to save for retirement.
When someone offers us something today, it’s tough for us to objectively consider how it might affect others tomorrow.
When the good times are upon us, it’s tough for us to imagine they could end.
Until, they do.
Chances are there’s a dead (or dying) mall in your hometown. Perhaps one day soon you’ll venture back into it. Not to what it once was, of course, but to what it now is — some loosely-renovated reimagining of it, valiantly serving its new purpose for consumers that can still make out where the Abercrombie & Fitch used to be. Most of those consumers will view its present condition as representative of the unrelenting determination of progress, a casualty of American innovation.
But not you. You’ll see in it the perils of status quo, and the hubris of excess. You’ll see it as a parable of immediate gratification, a reminder that if win at all costs becomes a rallying cry for hundreds of millions of people, the community around them can buckle.
Lost somewhere amidst the faded neon signs and dilapidated benches is a universal truth: that many of us, in fact, had more than we needed.
But we always believed we needed a little bit more.