REITs: Green Street Warns COVID-19 Will Eliminate Half of Malls

April 29, 2020 | Latest News, News, Real Estate

The COVID-19 pandemic could mean the end of the line for many malls around the United States. Green Street Advisors, one of the best real estate and REIT research and investment firms in the country, says that more than half of all the department store anchored malls could be closed by the end of 2021. More than 60% of the anchor tenant space in these malls will likely empty by then as well.

COVID-19 and Mall Companies

There are still more than 1.000 malls in the United States.

More than half of them have department stores like J.C. Penney (NYSE: JCP), Nordstrom (NYSE: JWN), and Macy’s (NYSE: M) as tenants. Those big retailers are scrambling to close stores and conserve cash as the economy has been shut down because of the pandemic. Many existing department stores could end up filing for bankruptcy and disappear from the retail landscape for good.

Many retail tenants could invoke the co-tenancy clauses in their leases as the anchors close down. This clause gives them the right to demand rent relief or break the lease entirely if anchor space in the mall is vacant.

Retail centers, especially enclosed malls, were under pressure before the coronavirus came ashore in the United States. The spread across the country put many areas on lockdown, and malls were closed entirely. The rise of e-commerce had slowed sales dramatically in many malls. The arrival of the virus poured gas on the dumpster fire that is shopping malls in 2020.

Green Street Advisors analyst Vince Tibone says, “Many malls will now be faced with multiple anchor vacancies, a tough place to come back from, especially in an environment where demand for space is virtually non-existent.”

Mr. Tibone also wonders what malls will look like in the aftermath of the economic shutdown.

There will be fewer department stores than can serve as anchor tenants, and the malls that do survive the crisis will have to find another way to attract shoppers.

Recent: Real Estate: Navigating the Perfect Storm for Commercial RE

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