It is no secret that store closings have increased, some caused by on-line shopping like  Amazon,

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or the failed wage recovery after The Great Recession (aka, the WORSE wage recovery following a recession in recent history).

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Now Green Street Advisory has a study on Mall Turnovers and it is grim.

Across the 950 malls studied, over two-thirds saw a net decrease in the number of national tenants. While ‘A’ malls performed relatively well, they have not fully escaped the closures due to some retailers shuttering all their locations regardless of mall quality. Furthermore, most top-quality centers already have more of the national retailers as tenants, limiting their ability to find other national tenants to replace those that leave. Conversely, many lower-quality centers are seeing significant changes in their ability to retain and attract national retailers despite already housing fewer national retailers on average than ‘A’ malls. This trend demonstrates the challenge that many malls are now facing as they fill vacancies with more local and regional tenants.

In conclusion, the key takeaway is that it’s hard to assess what real estate is worth in the retail sector today. In-line tenant activity can provide a window into individual mall health. The Advisory & Consulting group’s analysis concludes that ~70% of malls have suffered a recent decline in the number of national tenants. Understanding which malls are most at risk in a timely fashion is key to anticipating possible “death spirals,” where malls can lose as much as 90% of their value (much more than other property types).

And yes, even “A” space is seeing negative tenant change, so it is no longer just fringe malls in depressed areas that are having problems.

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This will definitely put a dent into CMBS prices if the mall operators can’t replace the declining tennant rolls. That is, can mall operators repurpose vacant space (like having George Mason University offer classes in malls to eleviate their space constraint on Fairfax campus)?

Repurposing will likely be with local tenants and not national tenants.

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