Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Conventional wisdom holds that all malls are dying as consumers increasingly shop online. Shoppers fighting the crowds to buy presents this holiday season will tell you otherwise -- depending on which malls they visit, that is.

That's because some mall operators are actually raking in cash, creating a stark and growing divide between a handful of high-quality malls and hordes of middling to poor malls, as graded by real estate research firm Green Street Advisors. On that firm's scale, there are three dozen U.S. malls rated "A++" and about 270 high-performing malls with A ratings. There are more than 700 malls with lower grades. 


The top-rated shopping meccas in the country have flourished, while hundreds of others closed or turned into zombie malls, after a downsizing of national retail chains left certain malls vacant or desperate to fill space with local chains and non-retail tenants. This has created an unwillingness to open new malls -- only 6 have opened since 2006, according to Green Street. Shoppers have concentrated in top-tier malls, where vacancy rates are at all-time lows and national retailers have invested in their best stores to spruce up offerings. 

So what is the anatomy of a good mall? 

Take the retail market in Atlanta, Georgia, for example. Population, jobs, and home values are growing, helped by a concentration of Fortune 500 companies. The city counts more than a dozen malls, but only one gets an A++ grade from Green Street: Simon Property Group's Lenox Square. Lenox Square brings in more than $1,000 in sales per square foot, compared to $240 at Northlake Mall, a C-rated mall eight miles away, according to Green Street.


A look inside the two malls reveals a more detailed picture of the retail divide. It starts with their size, according to Green Street mall analyst DJ Busch. Lenox has 50 percent more space and many more tenants than Northlake, the lower-performing mall. Size and breadth makes malls a destination for shoppers and helps them compete with the variety of products offered online. 

Lenox also boasts luxury tenants such as Louis Vuitton, Prada, and Salvatore Ferragamo, attracting higher-spending customers and driving up the mall's sales per square foot, which lets it charge higher rents and attract quality tenants.

Lenox also has more productive department stores -- including Neiman Marcus and Bloomingdale's -- than Northlake's Sears, J.C. Penney, and Kohl's stores, which bring in fewer sales per square foot. Department stores tend to pay less in rent because they're meant to be traffic-driving anchors, but sluggish sales can dampen mall productivity and make it harder for operators to increase rent for other tenants. And poor-performing department stores like Sears are worrisome because closing locations can trigger contract clauses that let other tenants out of their leases, creating a downward "death spiral," Green Street's Busch said. 

Anchor Weights
Sales per square foot
Source: Bloomberg Intelligence, Company filings

Lenox has also diversified its anchors away from department stores to include restaurants and experiential, tech-heavy stores like Microsoft, Apple and Tesla, which can drive a mall's sales per square foot up by more than 10 percent and create the same kind of destination effect a department store once did. Other top malls are putting in traffic-driving amenities such as Whole Foods grocery stores, movie theaters, and high-end services like the Drybar hair salon. 

Apple Effect
An Apple store leads to a 13 percent bump in a mall's sales per square foot
Source: Green Street Advisors estimates, based on 2014 sales

Despite the 20-minute driving distance between the two Atlanta malls, the education and income differential in each mall's neighborhood is notable, though the median age and racial makeup are similar.


The divergence between the haves and have-nots can be seen in the share prices of publicly-traded retail REITs, which own about half of America's malls. 

Crowded Malls
Shares in Retail REIT's Diverge
Source: Bloomberg

For example, shares in Simon Property Group hit an all-time high in October and are handily beating the S&P 500, as the REIT continues to attract star tenants such as Nike and Apple, command higher rents, and get attractive financing terms.

Meanwhile, shares in low-quality mall REITs such as CBL & Associates and WP Glimcher have plunged more than 30 percent this year as they struggle to attract tenants and shoppers, according to Bloomberg Intelligence analyst Jeffrey Langbaum.

Investors in the best-performing retail REITs can expect buybacks and special dividends in the year to come, Langbaum noted, while rising interest rates will put even more financial pressure on weaker mall owners.

Both phenomena will widen the mall divide even more.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
Shelly Banjo in New York at
Rani Molla in New York at

To contact the editor responsible for this story:
Mark Gongloff at