July 9 (Reuters) – Even at the height of the 2009 financial crisis, it has never been more serious for owners of the world’s largest shopping malls.
New real estate industry data for June shows vacancy rates in indoor shopping malls in the United States may exceed those in suburban and linear malls.
Figures from real estate consultancy Jones Lang LaSalle add to a string of bankruptcies and takeovers, which has even seen industry leader Simon Property Group (SPG.N) hand over control of some buildings to creditors or take over. broken business transactions for their debts. .
JLL data predicts that U.S. indoor shopping center vacancy rates will peak at just under 9% this year, compared to 7.8% for outdoor malls and 7% for “malls,” code l industry for outdoor centers anchored by big box retailers like Best Buy (BBY.N) or Target (TGT.N).
Experts say a deeper change is underway, with property owners focusing their investments on outdoor locations and small stores in cheaper locations where buyers can feel more comfortable in the post-world. COVID.
“The demand for space right now is higher than I’ve seen in 15 years,” said David Lukes, managing director of SITE Centers, which operates more than 100 power and shopping centers.
Agreements made or underway with retailers include Macy’s (MN), Lululemon Athletica (LULU.O), Bed Bath and Beyond (BBBY.O), Warby Parker and Walmart’s (WMT.N) Bonobos.
In Chicago, for example, Macy’s closed its sprawling store in the Water Tower Place building on the Magnificent Mile of Michigan Avenue, a magnet for thousands of shoppers and tourists every weekend for the past half-year. century.
The company is turning to modest buildings like its new “Market by Macy’s,” located on canal-side land in Fort Worth, Texas and flanked by a steakhouse and Wells Fargo branch.
In 2009, vacancy rates for the lowest-end properties peaked at 11%, while shopping centers still posted rates of just 5%.
But for Macy’s and others, the cost reward became compelling: The average annual rent for shopping centers in the first quarter of the year was $ 20.36 per square foot, or one-third the cost of major shopping centers in the United States. downtown.
In Magnificent Mile, the vacancy rate has more than doubled to over 8% today, down from 4% at the end of 2019. Rents have fallen 2.5% over the past year to reach yet another level very high of $ 62.30, according to industry data provider CoStar.
Alexander Levy, senior consultant at CoStar, said malls in suburban areas have fared better than malls in urban areas since pandemic-related restrictions in the United States began to ease in the first quarter.
Signet (SIG.N), Ethan Allen Interiors (ETH.N) and Express (EXPR.N) are among those that have opened stores in suburban areas, ranging from the suburbs of San Mateo, California and Southlake to small cities like Westport, Connecticut and Towson, Maryland.
“We are currently experiencing a migration to the suburbs,” said Conor Flynn, managing director of US investment firm Kimco Realty (KIM.N), which owns nearly 400 shopping malls and outdoor complexes based around grocery stores. .
“I’m cautiously optimistic that the lion’s share of what we’ve been through is sticky.”
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Downtown owners responded by converting some shopping centers into mixed-use commercial and residential buildings.
In Britain, Intu, owner of Trafford shopping center in Manchester who called administrators last year, said they had applied for permission to use his outdoor space for events, food stalls and a urban beach.
Others, like British Land, which owns offices and shopping centers, say they are now targeting “last mile” logistics, to get online orders to consumers’ doors as quickly as possible.
For Ian Fagalar, a former mall visitor and Bay Area resident, it may be too late: The Hilltop mall he frequented as a child in Richmond, Calif., Has now been converted to residential and other purposes.
“Retail stores are dropping like flies,” he says. “I shop 99% of the time online now. “
Reporting by Nivedita Balu and Praveen Paramasivam in Bengaluru; written by Patrick Graham; Editing by Bernard Orr and Diane Craft
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