Malls are experiencing a resurgence due to Gen Z's preference for in-person shopping.

• According to a survey by the International Council of Shopping Centers, Gen Z consumers, despite being digital natives, shop in stores as frequently as their Baby Boomer grandparents.
• According to interviews with shoppers and experts, the new generation of spenders are looking for social connections, instant gratification, and opportunities to share on social media.
• Teens and twenty-somethings are being targeted by mall owners and retailers with distinctive store features, such as selfie mirrors or videos, and immersive experiences like pop-up concerts.

In the second part of a three-part CNBC series, developers are transforming U.S. shopping malls to attract new retailers, experiences, and even apartments.

Typically, Lindsey Hyams begins her shopping trips online, whether it's for a gift or new clothing.

Instead of clicking "buy," the 23-year-old frequently visits the mall to make her purchases.

"The Marlboro, N.J. resident stated that it is more convenient for them to go to the store and try on the item. If it doesn't fit, they can return it immediately without having to go to UPS, send it back, and wait for another five to seven business days."

According to a survey by the International Council of Shopping Centers, a trade group, Gen Z, the generation of tech-savvy teens and twenty-somethings, shops in stores as much as their Baby Boomer grandparents, but less than millennials and Gen X.

According to an annual survey by EY, nearly 63% of Gen Z respondents plan to make holiday purchases at physical stores, while only about 50% said they would make purchases on retailers' websites and apps during the season, lower than any other generation besides Baby Boomers.

The new generation of spenders, who prioritize socializing with friends, convenience, and experiences to share on social media, have become a vital market for malls. In response, malls have introduced new brands and attractions, such as restaurants and rock climbing walls, while legacy stores like Macy's and JCPenney struggle to remain competitive. Some well-known retailers, such as Lord & Taylor and Sears, have even vanished from the scene.

Retailers are shifting their focus to attract younger shoppers as traditional stores close. Princess Polly, an Australian-based online-only apparel retailer, has opened its first stores in U.S. shopping centers. In response to the changing market, longtime mall staple added "scent bars" and video content to some of its locations to cater to Gen Z. Hollister, an -owned chain, has thrown events at its stores tailored to younger consumers, including pop-up concerts and autograph signings.

The country's largest mall owner has launched a marketing campaign targeting Gen Z, titled "Meet Me @the mall." The ads, which are running on websites and apps including YouTube, TikTok, and Netflix, feature young adults dancing and roller skating at the mall.

Brookfield Properties has introduced various attractions to its malls to entice Gen Z and keep them there for longer periods. The operator has turned to mini golfing, fresh food court offerings, and hot fashion brands to attract younger shoppers. Additionally, it has hosted a traveling interactive art exhibit, "You Are Beautiful" by Chicago-based artist Matthew Hoffman, at different malls where people can post a sticker with their own inspirational message or affirmation.

Brookfield Properties' retail CEO, Kevin McCrain, stated that Gen Z seeks distinctive experiences that can be experienced in person and shared on social media.

""The best place to showcase their purchases or experiences is at the mall," he stated."

Seeking real-world experiences

The Annie E. Casey Foundation estimates that Gen Z, comprising approximately 69 million people aged 13 to 28, accounts for about 20% of the U.S. population. According to McKinsey, this age group's total spending power amounts to approximately $150 billion.

The allure of the mall for some Gen Z individuals might be similar to that depicted in iconic films such as "Clueless," "Fast Times at Ridgemont High," and "Mallrats," where malls were portrayed as popular hangout spots for teenagers.

According to Roberta Katz, a Stanford University senior research scholar and author of "Gen Z, Explained: The Art of Living in Digital Age," the group's preferences have been influenced by growing up in a digital world.

Despite being raised in an era where online communication is prevalent, most Gen Z individuals surveyed or interviewed expressed a preference for in-person communication.

"Gen Zers are conscious of the importance of staying human in the digital age, as they value face-to-face and one-on-one communication. Shopping for them can be an opportunity to provide a real-life experience in a store."

ICSC CEO Tom McGee stated that teenagers and young adults have been influenced by experiencing the Great Recession, which caused them to witness family members or friends lose their jobs, and the Covid-19 pandemic, which prevented them from participating in significant milestones such as attending school dances, socializing with friends in the cafeteria, or living in college dorms.

Gen Z's views on spending and social interaction are influenced by profound experiences, according to McGee, a father of two daughters in this generation.

"Now that the restrictions have been lifted, they really crave physical interaction," he said. "They missed it."

What motivates Gen Z to visit the mall? Immediate gratification. According to a survey of shoppers by ICSC, about 30% of Gen Z consumers choose to buy items in person because they receive them instantly, while 28% prefer in-person shopping because they can physically examine the products.

The way stores look and where retailers are investing is being influenced by Gen Z's interest in brick-and-mortar shopping.

In the last full fiscal year, digital sales accounted for 60% of revenue for Abercrombie & Fitch's namesake brand, while only 30% of revenue came from the Hollister brand, which targets Gen Z shoppers.

Scott Lipesky, the Chief Operating Officer of Abercrombie & Fitch, stated that the brand is now focusing on not only creating visually appealing videos and photographs online but also ensuring that its stores are well-lit, easy to navigate, and provide a comfortable shopping experience.

The retailer must ensure its website and app remain relevant to teenagers who are blending the digital and physical worlds. These customers typically find products online through websites and social media before visiting stores to test them in person.

Lipesky stated that shoppers often ask themselves, "Do these fit me properly?" before making a purchase. They may try them on, feel and touch them, and sometimes even go back home to buy online.

Abercrombie has hosted pop-up events at mall stores to draw in shoppers, such as an autograph signing with Ohio State football players at its Hollister store in Columbus, Ohio, and a concert in one of its Hollister stores in California. Additionally, Abercrombie has introduced a collegiate collection of sweatshirts, hoodies, and tees featuring vintage spins on college logos, which it sells based on the mall's proximity to nearby universities.

Princess Polly, unlike other retailers, is a newcomer to malls. The online-only retailer opened its first stores in U.S. malls after hearing from shoppers who wanted to try on and feel the brand's tops, dresses and more in person, said Courtney Dres, the company's chief merchant.

She stated that at store openings, people started queuing up at 4 a.m. to be among the first to enter.

Princess Polly has expanded its retail presence by increasing its store size, adding fitting rooms, and offering a broader range of products such as handbags, sunglasses, and jewelry.

Princess Polly's core customer, aged 16 to 26, is catered to with features such as mirrors for selfies and LED screens for showcasing outfits.

So far, Princess Polly has launched five stores, with two more set to open in the near future. Most of these stores are located in malls.

Dres stated that our customer is making it clear that they want to shop with us both online and in person.

Hunting for deals

Discount stores and off-price retailers are the most popular shopping destinations among Gen Z consumers, according to a survey by ICSC. About half of the respondents said they shop at Walmart, TJ Maxx, Target, and Kohl's most frequently. A quarter of the respondents said they shop at dollar stores, and 13% said they frequent thrift shops or second-hand sites like ThredUp the most.

Gen Z shoppers expect brands to seamlessly connect their online and offline businesses.

A Gen Z shopper from Marlboro, N.J., named Hyams, browses retailers' websites and saves items in an app called Locker. She collects products from her favorite stores, including Aritzia, Abercrombie, Zara, and American Eagle.

She checks if a sweater, jumpsuit, or dress is available in a mall within a 40-minute drive, as she lives near several major malls, including Freehold Raceway Mall and The Mall at Short Hills.

She frequently chooses to drive to the mall to avoid waiting and to touch, feel or try on items before buying them.

Hyams experiences nostalgia at the mall, which she visits with her family members for shopping, coffee, perfume testing, and meals. These additional activities not only benefit her but also the mall owners.

Stepping into the mall feels like entering a mini city.

""As I walked into the mall, it felt like I was entering my own little town, with all the little experiences and new people I encountered," she said."

— CNBC's Shawn Baldwin contributed to this report.