Can shopping malls survive the coronavirus pandemic?

Just when many shopping malls had finally figured out how to adapt to the era of digital retail, the coronavirus pandemic upended everything.

 

COVID-19 "Mall Killer"

Having seen their recent move toward dining, entertainment, fitness and personal services come to a screeching halt – a pivot that was supposed to help them survive the Amazon age – malls throughout America are suddenly running out of time.

With J.C. Penney trying to avoid liquidation, smaller retailers closing or requesting rent relief, and venues like theaters still temporarily shut down due to COVID-19, anywhere from 1 in 4 malls to 1 in 2 could go out of business altogether, analysts projected.

“The whole business model of a mall, which is about pulling in as many people as you can and getting them to stay for as long as you can, has just unraveled,” said Neil Saunders, managing director of consultancy GlobalData Retail.

The bleak turn of events has provided more fuel to online retailers already swiping market share away from malls that were relying on diminishing foot traffic to apparel shops and department stores in particular.

“There are malls that this crisis will accelerate their closure, no doubt,” said Kat Cole, president and chief operating officer of Focus Brands, parent company of mall classics like Cinnabon and Auntie Anne’s. “How many is anybody’s guess, but we’re hoping it’s a minority.”


Bed Bath & Beyond Store Closings

Bed Bath announces plans to permanently close 200 stores over next two years.  Bed Bath & Beyond Inc. plans to close approximately 21% of its namesake stores, or 200 locations, over the next two years, the company announced Wednesday.

The New Jersey-based home goods retailer, which also operates buybuy Baby, Harmon Face Values and World Market, said the closing stores would "mostly" be Bed Bath & Beyond stores during an earnings call with analysts.


Face Mask Requirements

Can stores make you wear a mask? Do kids have to wear masks?

Analysts at Coresight Research, which tracks retail closures, projected that about 25% of America’s malls would disappear within the next three to five years. But that could rise to as many as 50% “if we can’t stop the bleeding,” Coresight CEO Deborah Weinswig said in an interview. “That ends up changing the face of America.”

In general, analysts say that high-end “A” malls are in the best shape because their luxury retail tenants have higher profit margins and thus are better able to withstand the downturn. But so-called “B” and “C” malls, which have lower-priced stores and more vacancies, are facing a high risk of closure. “They’re trying to plug the holes in a dam,” Weinswig said.

Even malls that bet big on in-person experiences that were considered to be extremely resilient in the age of digital retail are suddenly experiencing nothing but pain.  “A lot of the things that malls have built-in like gyms, movie theaters and restaurants, food service are just not able to operate and pull in customers the way they once did,” Saunders said. “They’re either having to shut down or limit capacity or customers are very reluctant to go there.”

Mall occupancy rates hit their lowest level in at least a decade in the second quarter of 2020 at 94.4%, according to CoStar Group, which tracks real estate.  Of the nation’s 1,793 enclosed shopping malls, nearly 500 “are at risk due to their location being poor” or “due to their dependence” on office workers or tourism for foot traffic, CoStar senior consultant Kevin Cody said. 

 

Source: USA Today by Nathan Bomey / Kelly Tyko