Ratings service: B malls still reasonably strong
Death knells for B-Class malls are rung regularly by the general business press and tech pundits, but a major ratings service is telling investors to hold off on funeral plans.
“There’s certainly been far more store closings in 2017 than in previous years…but I think it’s fair to say that investors are comfortable that bricks-and-mortar retail won’t disappear,” said Fitch Ratings managing director Huxley Somerville in a video released by the company this week.
Asked by Chain Store Age to assess Fitch’s outlook for B malls in near future, Huxley presented a scenario that’s less about which stores leave a property than it is about how mall owners fill the empty space.
“We have to look at these malls and understand how a reasonably strong and stable operating history might change over the next five to 10 years,” Somerville said. “There will be dead malls, but will they have life in another format?”
Of course, the most-used word in real estate — location — comes into play.
“If you have a property in an in-fill location, surrounded by residential property, it’s going to be more valuable than a property on the edge of town,” Somerville said. “The former is the kind of thing that would make us less conservative in our assessment of the value of a mall.”
Mixed-use projects and dining and entertainment replacements for closed anchors are among the factors that can keep such properties relevant for years to come.
“We’re definitely not of the opinion that retail is going to hell in a handbasket,” Somerville said.
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