What’s next for struggling shopping malls?
What’s next for struggling shopping malls?
Checking in on the consumer economy, one number stood out in the latest retail sales numbers: Department store sales were up by 9.7% in September.
That sounds pretty good, until you consider just how hard they’ve fallen in the pandemic, and that they’re still down 7.3% from a year ago.
And — just to put a pin in it — their killer competitor, e-commerce is up 32% this year according to eMarketer as consumers shun brick-and-mortar stores and do their buying by clicking.
There’s been a wave of store chain bankruptcies — J.C. Penney, Lord & Taylor and J. Crew, to name a few. So malls are losing anchor tenants and specialty retailers, and food courts and multiplexes are going dark.
“Commercial real estate — specifically retail mall real estate — is in a crisis,” said Camilla Yanushevsky, senior equity research analyst at CFRA Research.
She said consumers are strapped for cash and afraid to shop in stores, sales are way down, so “we’ve seen a number of retailers not pay rent.”
Which makes it harder for mall owners to pay their mortgages.
Some struggling malls are trying to reinvent themselves with medical offices, apartments, schools and Amazon fulfillment centers.
Yanushevsky said mall landlords can get $20 a square foot for a department store. They can only charge half or less for a fulfillment center.
“If it can’t be repurposed, it’s likely to eventually die,” said Mark Cohen at Columbia Business School. That leaves an enormous empty shell that could take years to redevelop.
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