“Sears closures (which add to BonTon’s liquidation and closure of stores) have left landlords grappling with a wave of big box vacancies that are expensive to re-tenant,” Green Street Advisors analyst DJ Busch said. “The situation will deteriorate further before it gets better.”
Many U.S. mall owners, except for top-tier landlords Simon and Taubman, are “ill-equipped” to face an inevitable wave of more department store closures, he added. He cited companies like CBL, PREIT, Washington Prime Group and Macerich as examples of those that won’t have enough capital to redevelop anchor boxes at their properties “in a reasonable time period.” He anticipates more and more landlords will be forced to sell assets or look for other ways to raise capital, which could cut into profits.
Busch also warns that landlords with lower-quality malls, like CBL, are becoming increasingly distressed as they take on more debt to finance their lofty redevelopment plans. CBL — which is based in Chattanooga, Tennessee, and operates 141 properties — said Tuesday it was making “significant progress” on a slew of redevelopments, including one where it added a Round1 bowling and entertainment facility to Jefferson Mall in Louisville, Kentucky. In 2019, it said it will take an old Sears at Hamilton Place in Chattanooga and add a Dave & Buster’s. It’s also looking to add casinos to some properties to replace department stores.
Mall owners are expected to talk more about their redevelopment strategies this week at the ICSC Deal Making conference in New York, which brings together retail landlords and tenants.