This is a question that has been asked many times, but one that is difficult to answer. Who is to say how many malls are too many? Fortunately, the market will decide.

Shopping malls are essentially a consumer product that offers convenience and comfort to shoppers. The main reason new shopping malls are built is because investors believe that there is, or will be, sufficient demand for new retail space. Retailers in turn will continue to seek new space if they believe there is excess demand for their goods. Overall demand for goods is a product of consumer spending, which itself depends on the general health of the economy and the purchasing power of consumers.

One has only to visit almost any Prague shopping mall during the Christmas season to see that business is very brisk, suggesting there is indeed very strong consumer demand for goods. This is consistent with data that the Czech economy is growing at a very good pace.

I grew up in Toronto, Canada, and cannot remember a time when new shopping malls were not being developed. Perhaps it is a little misleading to say "new" malls, because I include expansion and upgrade of existing malls in the category of new developments. We are already seeing this here, as many existing malls are adding space.

While it is the perceived demand for new retail space that makes shopping malls economically attractive for investors, it is also important to remember that due to the size of the investment, only a "few" investors have the money needed to build the large malls. I have put "few" in quotes because paradoxically, there is currently a lot of money in the world designated for investment in real estate, particularly through real estate investment funds or trusts. Locally, this has had the effect of putting downward pressure on investment yields, thus making the threshold for returns on real estate investments lower and accordingly, more projects are viewed as viable. The big international real estate funds love shopping malls because they can invest a lot of money at once and receive steady cash flows from tenant rents.

Having said that, the one limiting factor for new mall development (and in this case I mean green-field developments) is location. There are only a limited number of locations that can support a large mall, i.e., more than 100,000 square meters of retail space. Over time the trend will be expansion of existing sites and development of smaller specialty malls, such as a mall focusing on designer clothing or high-end products.

Ultimately, except perhaps for shopping mall landlords, the development of new malls is good for everyone. First, if supply of retail space increases beyond demand for such space, rental rates will drop as landlords are forced to make their site more financially attractive to retailers. One would expect lower rents to result in lower prices for goods. Second, retailers themselves will need to improve their products and customer approach, knowing that there are many other places to shop. Third, malls will need to become better operated, better designed and offer more supplemental services such as day care.

We can already see how this affects shopping habits, as well-operated malls such as Metropole are almost always full while other malls are losing ground. All of these factors are good for consumers. And finally, shopping malls are a platform for spending, and given the concept of the velocity of money, spending is good for economic growth.

Besides, where would fathers shop on Christmas Day if there were no shopping malls?