American malls run on a “grow and harvest” business model — investment-minded thinking we can learn from their differences with Japan.

When you hear the words “shopping mall,” what kind of scene comes to mind?

A large complex bustling with families on the weekend. A place filled with movie theaters, restaurants, and clothing stores where you can easily spend the whole day—a full-scale entertainment space. Many people probably have that sort of image.

In Japan, chains like AEON Mall and LaLaport are well-known, and you can spot similar facilities in regional cities all over the country. But in fact, this “mall” format originally came from the United States—and its business model is quite different from that of Japanese malls.

Today, I’d like to talk about the profit structure of American shopping malls, comparing it with Japanese malls as we go.

The origin and evolution of the word “mall”

The word “mall” originally referred to a tree-lined promenade. One theory is that it evolved from “pall-mall,” a lawn game popular in medieval Europe. The court used for that game was later redeveloped as a walking path, and over time “pall-mall” shifted into “mall.”

As modern cities developed, the word “mall” expanded in meaning—from an outdoor shopping street to the large indoor commercial facilities we know today.

The best-known examples are the shopping malls that spread across the American suburbs.

U.S. malls as joint projects: developers × department stores

Malls began to spread in the United States in the 1950s, alongside the growth of suburban housing. With the rise of the car-centered society, commercial centers moved from dense urban cores to large-scale shopping centers that took advantage of wide-open suburban land.

What’s interesting is who developed them. Many malls were created through joint projects between real estate developers and major department stores.

In other words, construction and land development were handled by developers, while big department stores like Macy’s and Sears served as anchor tenants to drive customer traffic. Together, they built massive commercial hubs.

“Grow and harvest”: the American profit structure

The most distinctive aspect of U.S. mall operations is the investment mindset behind tenant leasing.

When a new mall is built, of course the operator wants to attract tenants. But in the U.S., if the mall’s future potential is promising, it’s not unusual to exempt certain tenants from paying rent at first.

For example, if a brand is still relatively unknown but expected to grow rapidly, the mall might offer several years of free or heavily discounted rent. The aim is to help that brand grow, thereby increasing the overall value of the mall.

This is essentially the developer and anchor store investing in the brand.

Some now-famous chains—like Banana Republic and Crate & Barrel—grew rapidly under this kind of support and went on to expand nationwide.

A venture-capital-like contract structure

Naturally, these rent exemptions come with conditions.

One of them is a clause giving the developer priority when opening future locations, such as a requirement that the brand open in newly developed malls as well. In other words, once a brand becomes a traffic-driving tenant, the developer wants to “lock it in” for other properties too.

This is a venture capital–style mindset: instead of a simple landlord–tenant relationship, it’s a “strategic partnership” built on the assumption that both sides will grow together.

Japanese malls: a stability-first model

By contrast, many Japanese malls rely on a more traditional tenant-revenue model.

Take AEON Mall as an example: a large portion of its revenue comes from fixed rents and percentage rent, where tenants pay the landlord a fixed percentage of their sales. If a tenant’s sales go up, the mall’s income from percentage rent also increases—but at its core, it’s still a rental business.

As a result, there is less emphasis on “nurturing” tenants and more emphasis on attracting brands that already have a track record.

Well-known chains that reliably draw crowds, or long-established local businesses with stable customer bases, are favored. The kind of risk-taking, investment-driven stance seen in U.S. malls is relatively rare.

How this difference shapes the future

Of course, the Japanese model has its advantages. By minimizing tenant risk and steadily stacking rental income, it works very well as a conservative, reliable form of land use.

However, the American model is built on a growth strategy of “if it works, the upside is huge.”

If a brand that was supported early on goes public or becomes a powerful anchor that boosts other real estate projects, the long-term profit potential can be very large.

Can Japan adopt more of a “grow and harvest” mindset?

In many regional Japanese malls, vacant units and declining foot traffic are becoming serious problems. Against this backdrop, there is surely room to introduce more strategic “investment and nurturing” models instead of relying solely on traditional rental contracts.

For instance, a mall might exempt part of the rent for promising local entrepreneurs or craft brands, enhancing the overall appeal of the mall. Or it might designate a specific zone as a “startup area,” offering capital support and physical store space as a package.

There is no reason such experiments couldn’t happen.

In closing: how do you “cultivate” a place?

A mall is more than just a place to shop. It’s a space where people gather, create, and grow. Adopting an investment mindset that creates value in the place itself, as American malls do, could offer important hints for the future of Japanese retail and real estate.

“Grow and harvest” may sound a bit harsh at first. But behind it lies a belief in the potential of people, brands, and local communities.

If you look at the shopping centers around you from that perspective, you might start to see them in a very different light.