Malls have long been losing steam, but it’s worse than we thought

Shopping malls have lost ⅓ of their value in the last 4 years, and could face extinction soon.

(Source: Getty Images/fanjianhua)

Malls have long been losing steam, but it’s worse than we thought

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.

Topics: Shopping

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