What’s next for shopping malls? What brokers need to know

shopping-mall-320x213.jpgThe owners of malls—and the brokers that find leases for these assets—are certainly very busy right now.

Every week, there seems to be more news about a major department store anchor shutting down tons of stores, which means there is a lot of vacant space on the horizon that will need to be filled.

Here are some of the major chains having problems right now.

JCPenney

J. C. Penney Corp.’s recent announcement that it could close 140 stores is not that big of a surprise. It was having sales issues in recent quarters and was clearly struggling to turn around its brick-and-mortar locations. While same-store sales only dipped 0.7% year over year during its fourth quarter, executives reportedly say the strategy shift is to combat increased competition from online retailers.

Macy’s

Macy’s, another historic stalwart at shopping malls, is also shutting units. It’s closing 68 stores this year on top of the 100 it shut last year. Macy’s had a pretty rough fourth quarter: profits declined and same-store sales dropped 2.7% year over year. It’s working on “omnichannel strategies” and growing some of its other store concepts, such as the off-price Macy’s Backstage, in efforts to restore the company to health, according to CEO Terry Lundgren.

Sears

Sears is arguably the first U.S. department store chain. But despite its strong historic reputation, it’s been a bit of a mess for well over a decade. Just look at Sears Holdings’ stock price over the last five years. The retailer has gone from trading for about $70 a share at its peak to floating below the $8 range these days. And Sears and Kmart store closures have been happening by the dozens for the last few years.


It’s not just the internet

Everyone wants to blame Amazon and the rise of online retail for these problems. That is part of the issue, of course, but it’s not the whole story. Take a look at a list of last year’s top e-commerce retailers. Macy’s was fifth. Sears even clocks in at number 15. Most of the top 25 are actually brick-and-mortar retailers.


In the early part of the 2000s, retailers expanded store counts like crazy, and developers were only too happy to build shopping centers to support this growth. At the same time, online shopping was
starting to really take off, with ecommerce sales increasing exponentially. Brick-and-mortar retailers ended up being late to the game, kicking off their ecommerce sites only when they felt the pressure from Amazon.

In other words, you can’t just blame the internet. It was also a result of poor planning—too many stores and not enough consideration of nascent trends.

Landlords and retailers will need to adapt to these changes, and commercial real estate brokers need to be prepared to step in and help guide them.

Next: 4 emerging trends in commercial real estate, according to ULI
Topics: Interviews