COVID-19 has sounded a death knell for malls in B, C, and D markets that were struggling to survive before the pandemic struck, according to a new report from Coresight Research.
Coresight, which focuses on disruptions between physical and digital retail, predicted that up to 25,000 stores will close by the end of 2020 and that more than half of those closures will happen in malls. Within five years, this trend will spell an end for as many as 300 of the 1,200 malls currently in operation in the United States, the report said.
The disappearance of department store anchors had already set in motion a rationalization of mall space, with a decided emphasis on restaurant and entertainment tenants. The onset of COVID-19, however, stimulated an upward trend in vacancy rates at B, C, and D malls, making their situations more dire.
At C and D malls, sales per square foot range from below $275 to $390, according to Korpacz Realty Advisors. Sales per square foot at A malls average between $550 and $900.
With department stores such as Neiman-Marcus and Lord & Taylor and cinema companies like CMX and Regal filing Chapter 11, mall owners are forced to look beyond entertainment and food and beverage tenants to fill big spaces and build traffic. It’s been reported that Simon Properties is having discussions with Amazon about converting empty anchor spaces into fulfillment centers. Healthcare facilities are also highly valued. Lower end malls, however, might not be able to compete for such tenants.