The worst is yet to come for American shopping malls.
As Macy’s, JCPenney, Sears and other major department stores close their doors, the malls that housed those stores are facing a serious crisis.
That’s because when so-called anchor tenants leave a mall, it opens the door for other stores to break their leases or negotiate much cheaper rent.
As one big store closes, it can take several smaller stores along with it like a house of cards. Experts predict that a quarter of American malls will close in five years — around 300 out of 1,100 that currently exist.
“When anchor stores close, it causes big problems for mall owners and other retailers in the mall,” says Howard Davidowitz, chairman of New York-based retail consulting and investment banking firm Davidowitz & Associates. “And I’d say this problem is only in its second inning.”
Retailers often sign co-tenancy agreements in their leases with malls, allowing them to reduce their rent or get out of a lease if a big store closes.