America’s malls are rotting away

America’s malls are rotting away

The worst is yet to come for American shopping malls.

As Macy’s, JCPenney, Sears and other major department stores close their doors, the malls that housed those stores are facing a serious crisis.

That’s because when so-called anchor tenants leave a mall, it opens the door for other stores to break their leases or negotiate much cheaper rent.

As one big store closes, it can take several smaller stores along with it like a house of cards. Experts predict that a quarter of American malls will close in five years — around 300 out of 1,100 that currently exist.

“When anchor stores close, it causes big problems for mall owners and other retailers in the mall,” says Howard Davidowitz, chairman of New York-based retail consulting and investment banking firm Davidowitz & Associates. “And I’d say this problem is only in its second inning.”

Retailers often sign co-tenancy agreements in their leases with malls, allowing them to reduce their rent or get out of a lease if a big store closes.

That’s because the smaller retailers next to anchor stores no longer benefit from the foot traffic that the major retailers received, according to Garrick Brown, vice president of retail research for Cushman & Wakefield.

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Brown said he expects the weakest malls to enter “death spirals.”

Many former anchor tenants are closing hundreds of stores as Amazon (AMZN) eats their lunch.

Sears(SHLD), which had operated nearly 3,800 stores as recently as a decade ago is now down to 1,104 stores. Macy’s (M) closed 68 stores this year, and JCPenney (JCP) was set to shutter 128.

It’s not just department stores that have mall owners worried……more here

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