Mall Tenants Seek Shorter Leases As America's Relics Of The 80's Teeter On The Brink

Tyler Durden's picture

As if things weren't bad enough for America's mall owners, what with the having to filling their retail space with high schools, grocers and churches, it seems that retailers have grown so uncertain about the future of these 1980s relics that they're only willing to sign 1-2 leases these days.

As Bloomberg points out this morning, leases renewals used to be 5-10 years in length but are increasingly only being signed with 1-2 year terms.  Meanwhile, thousands of stores are closing each year and it's only expected to get worse over time.

After more than a dozen bankruptcies this year contributed to thousands of store closures, visibility for the industry is so poor that retailers are pushing for lease renewals as short as a year or two -- down from five to 10 years.

 

“You’re certainly seeing the renewals geared toward the shorter term, rather than the five-year renewal,” said Andrew Graiser, head of A&G Realty Partners. Retailers are now struggling to figure out how many stores they actually need, he added, and landlords are looking at them “with a much closer eye than they did before.”

 

Somewhere between 9,000 and 10,000 stores will close in the U.S. this year, said Garrick Brown, vice president of Americas retail research for commercial broker Cushman & Wakefield -- more than twice as many as the 4,000 last year. He sees this figure rising to about 13,000 next year.

 

“Everyone’s trying to figure out where the bottom of the market’s going to be,” Brown said. He estimates it could occur in 2018 or early 2019.

 

Not surprisingly, retailers are finding it difficult to sign long-term leases in an environment where 26% of malls around the country are expected to close their doors over the next five years.

Further complicating the lease-length dilemma is the question of which shopping centers will still be around in a decade. Cushman & Wakefield’s Brown sees about 300 of 1,150 U.S. malls shutting down in the next five years.

 

Perry Mandarino, senior managing director and head of corporate finance at B. Riley & Co., predicts that retail bankruptcies and restructurings will further accelerate in 2018. Some of this will be the result of a long-overdue shakeout of the surfeit of U.S. store space, but the downturn is also compounded by shifts to online shopping and consumers spending on experiences rather than physical stuff, he said.

Meanwhile, landlords are trying to fight back, though it's a fairly difficult task both arms tied behind their backs.

Landlords “have their backs against the wall, so they’ve been fighting back, hard,” he said. “What you have is a game of chicken up to the end.”

 

“With all this excess inventory, landlords are trying to do whatever they can to keep malls occupied,” Agran said. “The more empty spaces, the more difficult it is to attract new tenants.”

Frankly, it's shocking that Abercrombie wouldn't jump at the opportunity to scoop up some prime square footage in this mall...it already has the Chili's awning and everything.

Mall

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Newsboy's picture

Urban repurposing boom for America.

Invest in infrastructure upgrades.

Great tag lines, hear that President Donald?

Stuck on Zero's picture

I think malls should kick out all the shops and go totally LaserTag.

Déjà view's picture

Great place to hide NEW VEHICLE INVENTORY...out of sight...out of mind...

open calender's picture

you can add an extra 1200/USD a week to your account working at home for 3 hours a day... go here to this site... http://bit.ly/2jdTzrM

847328_3527's picture

If the mall closes, where will all those Pakis go who sell stuff in the aisles?

fattail's picture

laser tag is for preschoolers and old ladies.  Paint Ball Bitchez.  OR.... better yet.

 

ROLLER PAINTBALL

 

CheapBastard's picture

<< Machesney Park Mall ... >>

They look closed.

christiangustafson's picture

It's toast.  Even the Olga's:

http://wac.450f.edgecastcdn.net/80450F/1440wrok.com/files/2017/01/proxy.jpg

The French voyageurs wept when they saw the rich and beautiful Illinois country laid out before them.  

And then they left and we shit all over it.

847328_3527's picture

Where will I be able to buy my $500 Air Jordans that can be stolen from me at gun point by a dindu if the malls close?

Where dey gonna go?

Sounds racist to shut the mall.

DoctorFix's picture

What's this about malls?  I'm too hypnotized by your avatar to care

Chuck Walla's picture

Naperville took the title of second largest city in Illinois from Rockford. Rockford is just waiting for the coup de grace these days. What a hole.

christiangustafson's picture

The Rock River Valley, from Beloit to Dixon, and soon the Quad Cities, is one gigantic rust belt.

We used to make things, furniture and screws, you know.

Naper's a bedroom community of office workers.

MuffDiver69's picture

Let's be honest. The numbers are deceiving.

Son of Loki's picture

'Bankruptcy is our strength!"

 

...or is it, "diversity is our strength?"

i forget.

Lost in translation's picture

Section 8 for Muslims, is what they'll become, one day.

gatorengineer's picture

Setion 8 for the whites displaced by the muslims.... fixed it for ya

aloha_snakbar's picture

Im shopping around for a month to month for a goat circumcision clinic...

directaction's picture

Why you need to do that each month?
Just do it once and then be done.

CheapBastard's picture
Oil price rout slams Houston's commercial real estate market (July 2016)

 

The prolonged slump in oil prices has slammed the office market in the U.S. energy industry hub of Houston, where more than 10 million square feet is available and vacancy rates are at their highest in 20 years, the real estate firm CBRE reported.

 

Thousands of energy industry employees have lost jobs and companies have slashed their capital budgets during the steep slide in crude prices, which are still down more than 50 percent since 2014.

 

http://www.reuters.com/article/us-property-texas-energy-idUSKCN0ZN2LY

 

Much worse now I heard from friendsliving there. Lots of empty brand new buildings along I-10.

MuffDiver69's picture

No shit and if it doesn't rain the crops die...

Déjà view's picture

This building never outlived teen years...

The Timberloch Tower first went up in 1998 and was later purchased by oil and gas company Anadarko Petroleum Corporation. But after employees at the Timberloch location were consolidated to two other Woodlands spots, the building then sat vacant
http://www.chron.com/neighborhood/woodlands/article/Watch-this-Woodlands...

847328_3527's picture

Hard to beleive they are building dozens more along I-10 and most are already sitting there empty. Who lends these people money?

If interest rates were normal (7-12%) this misallocation would be go on imo.

gatorengineer's picture

The shark has to keep swimming... liars loans apply to commercial too.  build a million square feet with a 5 year 1 percent arm....  after 5 years, rents will have gone up 35 percent and you are 100 percent occupied /sarc....

 

As long as the printing continues to socialize the losses it doesnt matter.

ToSoft4Truth's picture

There go the security jobs for returning vets. 

montresor's picture

Should be housing on that land..

Schmuck Raker's picture

I've got a 'brink' I'd like Kelly LeBrock to teeter on. ;D

Peak Finance's picture

Malls are a perfect reflection of the banality of modern american middle-class life. 

Dead, joyless, monochromatic, full of shuffeling zombies, aimless, pointless, 100 stores and literally not a single one selling a single fucking thing I need for my life, how do they make money?

It's patethic really. 

WTFUD's picture

CIA Money Laundering Rackets, Maybe!

daveO's picture

Women with charge cards.

Ms No's picture

I went to two malls recently trying to find shorts that are larger than the average pair of underwear and some light shirts that aren't see-through.  I went to Fashion Square mall in Scottsdale which is super nice and another average mall.  Summer normally slows down here some but Fashion Square looked deader than a doornail, more so than normal.  I went to Nordstroms and there were some people in there.  I saw a lot of sales racks and I looked at one with skirts and was in awe at how ugly they were.  When I checked the tag on one it $3,000.oo.  Good luck with that. 

White House Black Market was the only place that respectable clothing that wasn't ridiculously priced and didn't look like something a carnival whore would wear.  At the other mall it was depressing, exactly as you described, and they essentially had nothing I wanted.  I ended up buying a couple pairs of shorts at NY and Company because I tired of being in that depressing place.  Almost everybody had 40% off or better sales.  I didn't see anybody showing up for them except women going through boxes of junk at Victoria's Secret.  That place is super low quality.

Also the overly aggressive Jews that sell things at kiosks seriously piss me off.   I literally avoid whole sections of malls because of those pandhandler salesman, trying to push their weird hair oil and dead sea whateverthehell.  One grabbed at me a couple years ago and I punched him in the shoulder.  I seriously did that.  I am so tired of their mall kiosk aggression.  I told him that he should think twice before accosting women in the mall, so he didn't do anything about it.  Those people cost them a ton of money but that probably doesn't matter now.

 

Secret Weapon's picture

You are closer to the truth than you know.  These kiosks are training grounds for language and culture immersion so they learn to fit in. 

847328_3527's picture

Kiosks are 99% run by Israeli and Paki gangs. They are imported on some sort of visas that Hussein allowed and I am not sure if Trump can ever send them back.

Déjà view's picture

Fashion Square...existed before "One-Eyed Jack" was Gov...

IntTheLight's picture

I think those Israeli kids at kiosks here for other purposes. The kiosk a ruse. I wave them off. They are very aggressive.

August's picture

>>>I think those Israeli kids at kiosks here for other purposes

Thankfully, I have't been to a US mall in years... and don't have a clue as to what you're talking about!

bloofer's picture

I'm not much of a shopper, but my impression is that quality (and style) have gone downhill--as if the idea is to distract from the absence of quality with bling. Meanwhile, you can get high quality clothes at most thrift stores. 

Freddie's picture

Stupid white males cheering on their NBA, NFL and NCAA Trayvon rapist heroes.

directaction's picture

It's '80s not "80's."

Move the apostrophe.

yogibear's picture

Started ramping  up during the disco age.

How's Mall of America doing?

 

directaction's picture

Still busy. It'll be the last Big Mall that gets shuttered. 

IntTheLight's picture

Haven't the Somalis taken over? Saw a video and all I saw in that mall were burkas and crazed Somalis. Well, Somalis in America look very well fed.

willy up the creek's picture

Actually, shouldn't it be two apostrophes?  Like this: '80's.

VWAndy's picture

 Between stupid high rents and city shakedowns one would have to be nuts to open a storefront.