NYT/ With Department Stores Disappearing, Malls Could Be Next
08.07.2020
NEW YORK TIMES:
With Department Stores Disappearing, Malls Could Be Next
Brick-and-mortar retail was in the midst of seismic changes even before the pandemic. Analysts say as much as a quarter of America’s malls may close in the next five years.
The directory map for the Northfield Square Mall in Bourbonnais, Ill., has three glaring spaces where large department stores once stood. Soon there will be a fourth vacancy, now that J.C. Penney is liquidating stores after filing for bankruptcy.
With so much empty space and brick-and-mortar retail in the midst of seismic changes even before the pandemic hit, the mall’s owners have been talking with local officials about identifying a “higher and better use for the site,” though they have declined to elaborate on what that could be.
“Filling in one anchor space, generally, is doable,” said Elliot Nassim, president of Mason Asset Management, which co-owns the Northfield Square Mall and dozens of other enclosed shopping centers. “But once you get hit by two others and you’re dealing with three anchor closures, that’s usually where we become a little more likely to put it into the bucket of a redevelopment.”
The standard American mall — with its vast parking lots, escalators and air conditioning, and an atmosphere heavy on perfume samples and the scent of Mrs. Fields cookies — was built around department stores. But the pandemic has been devastating for the retail industry and many of those stores are disappearing at a rapid clip. Some chains are unable to pay rent and prominent department store chains including Neiman Marcus, as well as J.C. Penney, have filed for bankruptcy protection. As they close stores, it could cause other tenants to abandon malls at the same time as large specialty chains like Victoria’s Secret are shrinking.
Malls were already facing pressure from online shopping, but analysts now say that hundreds are at risk of closing in the next five years. That has the potential to reshape the suburbs, with many communities already debating whether abandoned malls can be turned into local markets or office space, even affordable housing.
“More companies have gone bankrupt than any of us have ever expected, and I do believe that will accelerate as we move through 2020, unfortunately,” said Deborah Weinswig, founder of Coresight Research, an advisory and research firm that specializes in retail and technology. “And then those who haven’t gone bankrupt are using this as an opportunity to clean up their real estate.”
Ms. Weinswig said the malls that are able to withstand the current turmoil will be healthier — better tenants, more inviting and occupied — but she anticipated that about 25 percent of the country’s nearly 1,200 malls were in danger.
Most retailers that have filed for bankruptcy are closing stores but plan to continue operating.