‘Zombie Malls’ Plague Towns as Tax Bases Dry Up

All around America, the “zombie mall” phenomenon is taking hold.

As The Wall Street Journal described in a report Sunday (Nov. 26),  hundreds of these malls now dot the U.S., with more stores closed than open.

Older, lower-end shopping centers have lost at least half and, in some cases, more than 70% of their value since the industry’s apex in late 2016, said the report — the WSJ’s latest in the decline of the American mall — which cited real estate research firm Green Street.

When the debt on these properties begins to exceed their value, owners tend to stop paying mortgages and try to sell. Enter Namdar Realty Group and Mason Asset Management, a New York real estate group that WSJ calls one of the most prolific mall purchasers, making money off these malls, even as local officials plead with them to essentially put the properties out of their misery.

The WSJ report uses the example of the Berkshire Mall in Pennsylvania, where the community of Wyomissing has seen its tax income plummet as the mall fades.

“It was thriving for at least three decades,” Wyomissing Borough Manager Michele Bare told the newspaper. “It’s just sad to see it become what it’s become. In a perfect world, a giant sinkhole would open up overnight when the property was vacant, so nobody was harmed, and swallow the entire mall.”

According to the WSJ, officials in other towns where Namdar and Mason own malls have sued the companies, alleging neglect of their properties. Some have tried to seize the malls via eminent domain, or publicly called on the owners to sell.

“It is always our goal to add value to our properties, and we are diligent in our efforts to remedy any maintenance or management issue that is brought to our attention,” the companies said.

The report comes weeks after new data from the Commerce Department — examining where consumers are and aren’t spending money — that “hints at gathering clouds for brick-and-mortar operators,” as PYMNTS wrote last week.

That report showed spending at department stores sliding by 1.2%, spending at home furnishing and furniture stores dropping 2% and miscellaneous store retailers sales falling by 1.7%.

Meanwhile, Mastercard released figures this weekend showing Black Friday shoppers upped their online spending by 8.5%, while in-store sales rose 1.1%.