[2/15/17] While the Great Recession halted much of the unsustainable expansion of retail space that has steadily diluted retailers’ sales per square foot averages, the U.S. remains overstored. In a recent report, CoStar Group contended that nearly 1 billion square feet of U.S. store space must go by closing stores, converting retail space for other uses or reducing rents.
Green Street Advisors last year suggested department stores must close hundreds of additional locations in order to recapture previous levels of productivity — action that could decimate malls. That would bring the number of malls closer to what they should be according to J. Rogers Kniffen Worldwide Enterprises founder-CEO Jan Kniffen, who said last year that while there are some 1,100 enclosed malls in the U.S., the number should be closer to 700.
“Simply put, it all comes down to productivity,” Suzanne Mulvee, director of U.S. research, retail for CoStar Portfolio Strategy, said in the report. “Retailers on average are generating fewer sales per square foot than they did during the decade leading up to the recession.”
Now reciprocal easement agreements appear to be fostering a real estate-specific “tragedy of the commons,” an economic conundrum where individuals move to reap the most benefit from a resource (in this case, shopping malls) to the detriment of the greater group.
While anchors — often department stores that are reeling from difficulties addressing changing consumer tastes and shopping behaviors — may see leverage in their contracts with their landlords, they may be hurting themselves in the long run if they don’t go along with much-needed modifications.