Why is money pouring into malls?

As everything from once-mighty department stores to niche clothing chains announce plans to shutter hundreds of locations and retailers file for bankruptcies at a record pace, real estate developers are pouring growing sums into retail projects.

Across the country, construction spending on shopping centers topped $1.6 billion in June, the largest amount since 2008 and the Great Recession.

Builders have been especially busy working on malls, spending $404 million in April. In nominal terms, that's the second highest monthly total ever according to census data, coming in behind July 2008.

So at a time when news headlines are full of store closings, and the internet methodically is destroying any experience that involves parking lots, fitting rooms, or cash registers, why on Earth are we still building more retail space?

First, it's worth pointing out that this isn't an entirely new dynamic. For the past two decades, retail development has outpaced population growth in most big metropolitan areas. That's partly due to over-exuberance, and partly in response to evolving consumer demand and competition.

Category-killing big box stores such as Best Buy or Bed Bath and Beyond anchored so-called power centers, increasing retail's physical footprint while simultaneously siphoning off customers who would have bought their linens and big screen televisions from traditional department stores.

More recently, mall owners have been spending money to renovate existing properties in a bid to draw foot traffic. That often means demolishing excess space and making improvements to create room for restaurants and other attractions in an effort to prolong the life of brick-and-mortar retail.

'The major consideration is investment in renovation and renewal of existing assets rather than new ground-up development,” said Sam Chandan, president of Chandan Economics. 'The experiential aspects of retailing and the provision of services that cannot be replicated through online sales, e.g., a dinner out, are driving investment in mall repositioning.”

There are other reasons for the higher numbers. A growing preference for building near urban centers may be inflating construction costs by forcing developers to pay more for labor and land.

Markets that are thriving today might not have enough retail, while areas that supported shopping centers decades ago no longer offer retailers the same opportunities.