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Shopping malls were once the go-to place for American teenagers to cause trouble hang with friends.
While mall traffic has been declining for years, recent valuations paint an ominous picture for the future. In the last 4 years, American malls have lost ⅓ of their value, per The Real Deal.
One reason is department store closures
Department stores often take on the role of “anchor properties,” or the largest, most prominent stores at a shopping mall.
JCPenney and Macy’s, 2 of the most common anchor tenants, have shuttered hundreds of stores since the start of the pandemic.
While this is a problem on its own, department store closures create 2 big problems for mall owners:
- Some malls offer co-tenancy clauses, which allow other retailers to get reduced rent if there are 2+ anchor property vacancies.
- Department store closures lead to less foot traffic for all retailers, which can accelerate other store closures.
This downward spiral affects everyone, even the biggest players. Case in point, 3 of the biggest mall landlords declared bankruptcy during the pandemic.
Not all malls are hurting
Strip malls have seen values pop 13% since the start of the pandemic.
But good luck finding a strip mall with the killer combo of Hot Topic, Claire’s, and Auntie Anne’s pretzels.
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