Half of department stores in malls could close permanently by end of next year: analysis

Half of U.S. malls containing large department store “anchors” could see those large chains closed by the end of next year, according to a new analysis.

CNBC reported Wednesday that a report from real estate consulting firm Green Street Advisors estimates that around half of the roughly 600 American malls feature tenants such as Macy’s, JCPenney and Neiman Marcus, many of which could be permanently shuttered due to financial hardships exacerbated by closures amid the coronavirus outbreak.

Vince Tibone, an analyst at the firm, told CNBC that such retail brick-and-mortar locations have been “kicking the can down the road” for years, and that the closures could lead to some malls facing serious challenges.

“Many malls will now be faced with multiple anchor vacancies, a tough place to come back from, especially in an environment where demand for space is virtually non-existent,” Tibone said. “This begs many questions. What will a mall redevelopment look like post-Covid? Backfilling with any retail could be tough and most non-retail development now likely doesn’t pencil.”

“The only certainty is that there will be far fewer department stores in the future and malls will need to adapt,” he continued.

Around 60 percent of the country’s roughly 1,000 malls still in operation have major retail chains as anchor tenants, according to CNBC. Should Green Street’s prediction come true, hundreds of stores will permanently close, potentially resulting in thousands of jobs never returning.

The warning comes as millions of Americans have already been pushed out of work due to the coronavirus outbreak, which has forced nonessential businesses to close across the U.S. Some states have released plans for the reopening of retail locations in the coming days or weeks, though others hesitate to do so as their cases have yet to plateau.

This article was corrected at 6:00 p.m. to note that Green Street Advisors estimated that the departments stores, not the malls themselves, would close.