10 years of robust growth for US malls

New study quantifies the competing tailwinds and headwinds affecting the U.S. retail sector, revealing a case for investment optimism

The growth prospects for U.S. malls are brighter than what conventional wisdom about the competing forces affecting the retail sector, including the growth of e-commerce, suggests, according to the new Red PaperRhetoric vs reality: Quantifying the long-term outlook for U.S. mall sales” by global alternative investment manager QIC.

Matthew Strotton, Global Director of Capital with QIC’s Global Real Estate investment arm, commented “there is no question that bricks-and-mortar retail has endured headwinds, and our physical offer, our stores and our retailers have needed to adjust for new consumer preferences. But we believe that predictions of the demise of the U.S. mall are overdone. In fact, in our macro and micro analysis of competing factors that impact the sector, we see robust growth for strategically managed A and B grade malls over the coming 10 years. These findings contribute directly into our future planning, including on how we view the new retail model as part of an overall town center/mixed use offering.”

Dr Matthew Peter, QIC’s Chief Economist and the Red Paper’s co-author said, “In conducting our quantitative analysis of the U.S. retail sector, we employed a top-down and bottom-up approach bringing together and scrutinizing all relevant data, enabling us to present a full view of the sector’s outlook. This analysis begins at the macroeconomic level by forecasting personal consumption and moves on to look with a microeconomic lens at sales at retail outlets (bricks-and-mortar and e-commerce) and malls as a whole. In assessing mall sales, the study also develops a more accurate, nuanced picture of malls by grade A, B and C/D.”

Published in August 2018, among the study’s key findings are: 


  • U.S. macroeconomic factors of low unemployment, rising wages, strong balance sheets and recent tax cuts will drive strong 3.5% annual growth in brick and mortar sales over the next 10 years, even as e-commerce’s share of the retail market doubles.
  • In competing with e-commerce, department stores and stores selling electronics/appliances, sporting goods and books/music will be hardest hit, losing 20% market share over the next decade. 
  • Food services, with little e-commerce penetration, stores selling food, beverages and other perishables and stores that sell health care products that require in-store services, will fare better. Consumers also prefer entertainment and personal services, fast-growing segments with low levels of e-commerce penetration.
  • Successful malls will be those that transform themselves beyond shopping into social town centres, places where people go to eat, meet friends, be entertained, relax or experience an array of other services. This requires a shift in tenant mix toward services, including dining, entertainment, medical centres, fitness and other personal services to boost sales and produce a more resilient mall.
  • The tenant mix of a genuine town centre can more than double sales growth of a mall that is currently operating with today’s typical tenant mix.
  • With their overexposure to department store anchors, vulnerability to e-commerce, generally poor locations and need for significant capital expenditure, hundreds of lower-quality (C and D) malls will need to be repurposed or closed over the coming decade. While some of the sales from the closed malls will be lost to e-commerce, a portion will be gained by nearby A and B grade malls.
  • Higher-quality malls can also benefit from strong growth in inline tenant sales (a primary driver of mall operating income, expected to average 3.4% over the next 10 years) as well as shifting the tenant mix to more internet-resistant offerings, including experiential services.
  • Retailers executing an omni-channel sales strategy can leverage their physical space to showcase products, build brand awareness, engage with customers and enable ‘click and collect’ and ‘click and deliver’ services. They can use the advantages of physical retail space in these and other ways to complement, rather than compete against, e-commerce.


Mr Strotton concluded, “Despite the negative headlines around the challenges facing the retail sector, it is important not to lose sight of the many nuanced underlying drivers of mall sales growth. With this much more detailed understanding, as well as our ability to actively manage quality assets, we see strong potential to build further value in our U.S. mall portfolio and deliver exceptional outcomes for investors.”


Read more about QIC’s study: view the full report here.


-      Ends     -

About QIC:

QIC is a global diversified alternative investment firm offering infrastructure, real estate, private capital, liquid strategies and multi-asset investments. It is one of the largest institutional investment managers in Australia, with A$86.1 billion (US$63.6 billion) in funds under management.[1] QIC has over 1000 employees and serves more than 110 clients. Headquartered in Brisbane, Australia, QIC also has offices in Sydney, Melbourne, New York, Los Angeles, Cleveland, Fort Lauderdale, San Francisco, London and Copenhagen. For more information, please visit: www.qic.com.

[1] As at 30 June 2018


About QIC Global Real Estate:

We own and manage an A$17.6 billion (US$13.0 billion) [2] portfolio of circa 50 retail and commercial properties across Australia and the US on behalf our institutional investment clients. Our management and investment approach centres on creating vibrant places at the heart of communities. Where people choose to be, and where they feel proud to belong. Places that build local experiences and meaningful relationships; with spaces to support each part of our lives.

[2] As of 30 June 2018



For further information, please contact:

Samantha Pankovas

BlueChip Communication

T: +61 9018 8602

E: samantha@bluechipcommunication.com.au 

About QIC

Investment Capabilities

Knowledge Centre

Latest News

About QIC