Even before the pandemic, many US malls were in decline. Years of developers overbuilding shopping centers resulted in a bubble of retail space that ultimately burst. While high-end malls filled with activities and restaurants still draw visitors, the rest often struggle to lure shoppers as their stores lose relevance and US consumers buy more online.
Now Covid-19 is increasing the pain. With stores closed and shoppers slashing discretionary spending, a large share of mall tenants are already failing to pay their rents. But even after the immediate crisis subsides, the pandemic is likely to spur a wave of store closures among retailers. Companies currently suffering include some of the biggest mall tenants in the US, many of them serving as important anchors in shopping centers around the country. Their struggles are only set to accelerate the demise of many malls.
Macy’s is the biggest mall tenant, occupying 6.2% of the square footage in US malls, according to a May 20 report by CoStar, a real-estate information firm. Last week, the company said it expects about $1 billion in losses this quarter, roughly equivalent to its entire profit in 2019. The next largest mall tenant is JC Penney, which recently declared bankruptcy and announced it would close 242 stores. Other big renters of mall space include Nordstrom, which plans to close 19 stores, and Victoria’s Secret, which said it will close about 250 stores in the US and Canada.
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