With J.C. Penney Co. and Sears Holdings Corp. racing to close stores, America's weakest malls are being pushed to the brink.There's more:
Nearly half of the 1,050 indoor and open air malls in the U.S. have both of those struggling chains as anchor tenants, according to real-estate research firm Green Street Advisors. Of those malls, nearly a quarter are struggling with sales below $300 per square foot and vacancy rates above 20%, meaning they will have a hard time finding new tenants if old ones leave.
For an already-weakened mall industry, the negative turn for two once-reliable anchors is promising more stress at a time when the Internet is steadily stealing traffic. And the pressure is only growing. Sears Chief Executive Eddie Lampert this week said he plans to close more stores to help return the company to profitability.
Vacancy rates rose and sales plunged at the Gallery at Military Circle, about 5 miles from downtown Norfolk, Va., after the Sears store closed its doors two years ago. Eventually the mall's owner missed multiple payments on its debt. Remaining retail tenants worry about what will happen when the Penney store closes this month, darkening another corner of the 44-year-old property.
The first U.S. indoor mall opened in Edina, Minn., in 1956, and construction peaked in the 1980s. Only six new malls have been built since 2010, according to CoStar Group, a provider of commercial real-estate information. Meanwhile, the number of "dead malls," those with vacancy rates over 40%, has nearly tripled since 2006 to 74 properties.Yet, Keynesian economists say we should encourage more debt with low interest rates to spur more mall building through secret Fed bailouts.