Long before the coronavirus struck, brick-and-mortar stores faced extinction by a combination of eCommerce and bankruptcies.
More than 9,300 brick-and-mortar stores closed last year in the U.S., shattering the previous record of 6,900 closures in 2017, according to Coresight Research.
Now, a study reveals COVID-19 is expected to shutter about half of the department stores anchoring America’s malls by the end of next year, CNBC reported.
The survey, from Green Street Advisors, said there are around 1,000 malls in the U.S., and about 60 percent of them feature large department stores, such as Macy’s, as anchor tenants.
The coronavirus pandemic has moved that timetable up. The crisis has crippled the U.S. economy and is speeding up the demise of department stores, the report said.
“The unusual aspect of this recession is the dramatic direct impact that the coronavirus fallout will have on some sectors,” Green Street said. “That fallout is worst for lodging, gaming, senior housing, nursing homes, student housing, and most retail.”
Vince Tibone, a Green Street Advisors analyst told CNBC one likely scenario to play out at malls is that tenants including Gap or Victoria’s Secret will use their lease clauses to demand rent relief, or break leases early, when anchor space sits vacant. That pressure could be what puts some malls entirely out of business.
“Many malls will now be faced with multiple anchor vacancies, a tough place to come back from, especially in an environment where demand for space is virtually non-existent,” Tibone said. “This begs many questions. What will a mall redevelopment look like post-COVID? … The only certainty is that there will be far fewer department stores in the future, and malls will need to adapt.”
Bloomberg reported Tennessee-based CBL Properties, which owns 68 enclosed, outlet and open-air retail malls, is seeking advice on strategic and financing options, including restructuring.
The news service said the company is considering ways to recapitalize, including an exchange offer in which senior holders of unsecured debt swap their investments for secured debt. A discussion of a bankruptcy filing could be a last resort.