Nolan Gray is a research fellow with the Mercatus Center at George Mason University and a professional city planner.
Boosted by a growing middle class, the shopping mall is booming in Central and South America.
Much has been made of the death of the North American mall. It isn’t hard to see why: Dozens of malls have closed over past decade and an estimated 25 percent of the roughly 1,100 still alive in the U.S. are projected to close by 2022. Developers haven’t built a new mall since 2006 (except for one in the bizarre land of Sarasota, Florida). But in Central and South America, it’s a very different story: Developers spent the past decade throwing up as many malls as investors will allow.
From Monterrey to Montevideo, an unprecedented explosion in Latin American mall construction is underway. According to one study, an estimated 100 new malls were built in 2016 alone. Today, the largest mall in the western hemisphere is in Panama.
And with this new mall craze comes mall culture: Like American teens in the 1980s and ’90s, Latin American teens today are spending more and more time milling around malls, sporting Abercrombie & Fitch and American Eagle gear. Why are malls booming in Latin America and dying in North America?
A few trends are driving this shift––some good, some bad. For starters, the growth of Latin America’s middle class has been a key part of the story. According to the World Bank, the middle class in Latin America grew by 50 percent between 2003 and 2009, now composing an unprecedented 30 percent of the population. In real terms, this means that 50 million Latin Americans now enjoy greater financial security and have some extra money to spend on mall mainstays like roasted nuts and fidget spinners.
When the American middle class boomed between 1945 and 2005, that translated into car buying, suburbanization, and shopping malls. The Latin American version is following a similar script. And with traditional retail taking a huge hit in the U.S. due to the rise of online retail and the pain of stagnant incomes after 2008, American mall chains, developers, and investors have every reason to look south for opportunity.
But fear of violent crime and a relative lack of high-quality urban environments are also factors in the Latin American mall boom. In cities like San Salvador or Bogotá, malls provide a safe place to shop, and mall managers invest heavily in security. Combine this with the lack of reliable mail and home delivery service that hampers the e-commerce sector and there isn’t much competition for Latin America’s rising middle-class shoppers.
In most U.S. cities, on the other hand, violent crime has fallen dramatically over the last 25 years, and walkable urban neighborhoods that boast restaurants, bars, salons, and “experiential retail” are thriving. In this sense, the decline of the North American mall reflects a positive trend: The Main Streets that malls once menaced are coming back. Such amenity-laden neighborhoods are also in a better position than suburban malls to fend off the threat of online shopping.
American mall managers trying to survive the retail meltdown might learn a few things from their southern neighbors. For example, in the U.S. and Canada, malls are still overwhelmingly anchored by major retailers like Sears, JC Penney, and Macy’s. And as the fortunes of these department stores have declined, they’ve dragged the malls they’re attached to with them. In Latin America, on the other hand, a whole variety of businesses act as anchors. Grocery stores are common in Latin American malls and are often situated at the end of long corridors lined with smaller shops, creating a steady flow of foot traffic.
Beyond retail, Latin American malls often house other major employers, including call centers, healthcare facilities, and office space. (In this sense, they are closer in spirit to the original vision of Austrian architect Victor Gruen, designer of the first enclosed shopping centers, who saw his creations as mixed-use hubs, not “gigantic shopping machines.”) On a typical weekday, a food court is full of uniformed employees instead of stay-at-home parents and truant teenagers. More and more, apartments and condos are being included in these malls. This diversity of uses and users could make them more sustainable in the long term.
On the flipside, it’s also not uncommon to find malls completely dedicated to products or industries other than clothes: In Guatemala City, one can find entire malls dedicated to fine dining and interior design. Both arrangements remain rare in the U.S. and Canada.
When we feel nostalgia for malls, maybe what we’re really feeling is nostalgia a time when incomes were rising and the quality of life of average people was improving. Today, that’s what’s happening in much of Latin America. But as their mall era begins, and the American one fades, enthusiasts of the format might hope to find a more enduring model for the mall’s future down south—and we should change land use policy to reflect that.